After a remarkably fruitful year in which the stock market shook off rising inflation and coronavirus cases, 2022 began with a decline.
Recent statements and past behavior by its chair, Jerome Powell, suggest it will ramp up the effort to fight inflation, then change course if markets become unduly agitated.
One reason for the January decline is the release of minutes from the December Fed meeting, which showed growing discomfort about inflation and included discussion of accelerating the pace of interest rate increases.
But if inflation stays high after a period of tightening, Mr. Sri-Kumar said, the Fed will have to maintain that tighter policy, however sensitive the markets might be to it.
Some investment advisers expect the Fed to become consistently hawkish.
The unemployment rate, 3.9 percent according to December data reported this month, is lower than in 2015, at the start of a Fed tightening cycle during which the labor market continued to strengthen.
“Some tangible changes will kick in, in the second or third quarter,” he said.
Simeon Hyman, global investment strategist at ProShares, an issuer of exchange-traded funds, is another inflation optimist.
International stock funds had an ordinary year, rising 7.9 percent, including 1.9 percent in the fourth quarter.
That could be great for society but potentially harmful for investors by removing the virus as a deus ex machina that has helped to make market conditions ideal.
If Omicron means a return to regular order, investors will have to contend with the highest inflation in a generation, record fiscal debt and a Fed lacking a reason not to tackle inflation forcefully.
She remains bullish toward stocks but emphasizes pockets that are less expensive, such as smaller companies and value stocks.
Other investment advisers also recommend looking for less overpriced market segments, but they differ on where to find them.
Ian Mortimer, a co-manager of the Guinness Atkinson Global Innovators fund, suggests owning “quality defensives,” stocks in industries that feature rising dividends.
If stocks do better than bonds in 2022, it will mean more of the same for fund owners.
Mr. Rieder favors such diverse assets as carmakers’ shares, investment-grade corporate bonds, and stocks in Indonesia and Colombia, although he broadly prefers American markets to foreign ones.