Gary Schlossberg, Wells Fargo Investment Institute global strategist, speaks via Zoom call to members of the Fresno Rotary Club Monday afternoon.

At a time when Covid infection rates are on the way up once again, “normalization” is a good way to describe how the economy will perform in 2022.

That’s the forecast from Gary Schlossberg, Wells Fargo Investment Institute global strategist, delivered via Zoom call to members of the Fresno Rotary Club Monday afternoon. Schlossberg delivers his highly anticipated forecast for the group each year.

The transition to normal will be a mixed bag for consumers and investors. Economic growth is expected to taper along with inflation. The short-term stimulus we saw in the last couple pandemic years will fade away as interest rates begin a slow rise.

Even with the very real threat posed by Covid-19 variants such as Omicron, Schlossberg said the economy has become more insulated since the shutdowns of spring 2020.

“The caseloads, the deaths are horrific, but the economic impact has been increasingly muted,” Schlossberg said.

He believes the US economy will grow at a rate of 4% to 4.5% in 2022. That’s down from some of the strongest growth rates around 5% seen in a long time, but is double from the average historical growth rate of 2% to 2.5%.

Another transition is the move away from the aggressive stimulus policy employed by the Federal Reserve to keep bond markets afloat. With the days of direct consumer stimulus in the rearview mirror, the only new spending on the horizon would be of the long-term variety as seen in bills such as the Build Back Better Act.

“The training wheels are coming off,” Schlossberg said.

Schlossberg expects Biden’s Build Back Better Act to be signed into law in the first quarter of this year, but without some of the lofty price tags that mark the current version of the bill.

In terms of global growth, Schlossberg expects China to pull back on some of its aggressive investment spending and looking more inward.

“They are counting on consumers to lead growth, much like us,” Schlossberg said. “China won’t be the engine of economic growth we saw earlier.”

Growth in corporate profits is also expected to fall from unheard of rates around 25% recently seen to the 8 to 9% range this year.

Inflation is also expected to come back down to earth from the current rate of around 6.8%, peaking at 7% and returning to 3.5% to 4% by the end of the year. Schlossberg noted that the recent years of 1% to 2% inflation growth will likely not return. We can expect a normalization of 2.5% to 3.5% growth in inflation — higher than what we saw heading into the pandemic.

One of the questions fielded by Schlossberg had to do with the emergence of cryptocurrencies as an investment instrument. He sees crypto undergoing institutionalization, becoming more of a market with transparency and regulation. He said if investors have a high risk tolerance, they could look at crypto as an effective way to diversify their holdings, but only at less than a recommended 5% of a total portfolio.

“It’s more like pork bellies than a truly investable asset,” he said about crypto. “I don’t see it as a stable, long-term investment asset quite yet.”