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Monthly Investment Outlook

Wells Fargo Investment Institute - January 2022

Presenter: Michelle Wan, CFA, Investment Strategy Analyst, Wells Fargo Investment Institute

Transcript: Monthly Investment Outlook January 2022: Easing supply chain

Presenter: Michelle Wan, CFA, Investment Strategy Analyst, Wells Fargo Investment Institute

Investment and Insurance Products: NOT FDIC Insured, NO Bank Guarantee, MAY Lose Value

Improvement in the global supply chain is being interrupted by fallout from the Omicron variant. On the supply side, the amount of goods imported and retail inventories not including autos have been growing rapidly. On the demand side, new orders have ticked down. The U.S. Manufacturing Purchasing Managers’ Index, also known as the PMI, declined — signaling cooling demand. This is a monthly survey that consolidates purchasing managers’ views on market conditions across all industries. The PMI decline was accompanied by improved survey results on lower prices paid and significantly faster delivery times. The December data were clearly showing supply chains easing.

As the New Year began, however, several underlying factors started to add obstacles to further significant improvement. Labor shortages continued. Labor participation remained relatively flat and at below pre-pandemic levels. The unemployment rate declined, but the increase in nonfarm payrolls was disappointing in December. Additionally, disruptions created by the fast spreading Omicron variant have resulted in port disruptions and higher worker absences. The recent surge in Omicron cases is pressuring an already tight labor market. As a result, we anticipate the economy growing more slowly than expected earlier in the first quarter of 2022.

Overall, we view these challenges brought by the Omicron variant as short-term in nature. As Omicron cases peak, we believe supply-chain improvements should resume. We expect investors to look beyond these short-term challenges and focus on a positive growth outlook for the U.S. in 2022.

Risk considerations

Forecasts are not guaranteed and based on certain assumptions and on views of market and economic conditions which are subject to change.

General disclosures

The opinions expressed reflect the judgment of the speaker as of the recording date and are subject to change without notice. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Past performance is no guarantee of future results. Additional information is available upon request.

The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This report is not intended to be a client‐specific suitability or best interest analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon.

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