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One of the most persistent investment trends is the migration of money out of stock mutual funds and into exchange-traded funds, which are easier to trade, have lower operating expenses and often have favorable tax treatment.

Over the last 10 years, a net $900 billion has flowed out of stock mutual funds and $1.8 trillion has flowed into stock E.T.F.s, according to Morningstar.

Eager to give the public what it wants, and to keep shareholders from walking out the door with their assets, some fund providers have begun to convert stock mutual funds into E.T.F.s. Others run E.T.F. versions of their popular mutual funds, and one company, Vanguard, allows tax-free direct swaps of mutual fund positions into equivalent E.T.F.s.

E.T.F.s are simpler and cheaper for managers to run than mutual funds. Investors benefit when the savings and convenience are passed on to them, and from other inherent advantages that drove the rise in E.T.F.s in the first place.

“There are real benefits to having more E.T.F.s, especially in larger, more liquid funds,” said Christopher Cordaro, chief investment officer of RegentAtlantic, a Morristown, N.J., financial-planning firm. “If I’ve got two versions of something and the E.T.F. has a lower-cost portfolio, it’s an easy decision to use the E.T.F. over the mutual fund.”

The decision to test the conversion concept was not all that easy for Guinness Atkinson Asset Management, which was the first fund provider to do it, said Todd Rosenbluth, director of E.T.F. and mutual fund research at CFRA Research. Jim Atkinson, Guinness Atkinson’s chief executive, said the plan was studied for two years. It was carried out in late March when Guinness Atkinson Dividend Builder and Guinness Atkinson Asia Pacific Dividend Builder became E.T.F.s listed on the New York Stock Exchange.

“This is a trial balloon for other funds,” he said. “Operationally, we want it to go OK.”

If it does, the firm’s alternative energy fund is up next. Mr. Atkinson conceded that while “there may be funds that are better as open-end mutual funds, our intention is to convert all of our funds.”

Dimensional Fund Advisors is sending aloft a trial balloon of its own. It plans to convert six stock mutual funds into E.T.F.s, with the first four conversions set for June. The new structure will allow it to reduce its annual management fee to 0.23 percent from about 0.32 percent on average.

A third fund provider, Foothill Capital Management, filed last month for approval to convert its Cannabis Growth Fund, with about $7 million of assets, into an E.T.F.

E.T.F.s are cheaper to run in part because the management company can stay out of the way and let buyers and sellers deal with one another. Operating a mutual fund means handling new investments and redemptions every day and having cash on hand in case redemptions significantly exceed sales.

Another advantage often accruing to E.T.F. shareholders is favorable tax treatment. Mutual funds generally have to distribute capital gains each year, whereas an E.T.F., like a stock, incurs tax liability only when the owner sells at a profit.

Converting a mutual fund to an E.T.F. is legally a merger of the old fund with the new, Mr. Atkinson said, and is thus not a taxable event.

Vanguard is using a different technique to let investors in 47 of its index mutual funds, 36 that own stocks and the others bonds, move their assets into E.T.F.s free of tax consequences. Each E.T.F. was created as a share class of the equivalent mutual fund, which the law regards as a nontaxable transfer.

Vanguard has no plans to convert any mutual funds, said Rich Powers, its head of E.T.F. and index product management, nor does the company expect to create E.T.F. share classes for any actively managed mutual funds.

Other fund providers run E.T.F. versions of their large index-based mutual funds, but Vanguard has a patent on the technique of tax-free transfers between share classes. Mr. Powers said there were discussions with other fund providers about licensing it, but none have taken the plunge, perhaps because the patent expires in two years and other companies may be waiting until then to offer such transfers.

Whichever companies follow in the footsteps of Guinness Atkinson and Dimensional in making conversions are not expected to be industry giants. Indeed, several of the largest fund providers — BlackRock, Vanguard, T. Rowe Price and Fidelity — said they had no intention to convert their mutual funds.

There are two reasons that conversions are more appealing to smaller firms. Mr. Cordaro noted that mutual funds can be bought and sold free of charge on platforms run by brokerages. The brokerages need large, popular fund providers — the BlackRocks of the world — to attract investors, but smaller managers need the platforms more than the platforms need them, so they often have to pay to be on them. E.T.F. managers face no such demand.

The other impediment for large managers is a feature of E.T.F.s that they might view as a bug, at least when it comes to actively managed portfolios: the requirement that most E.T.F.s disclose their holdings daily.

Disclosure is seldom a problem for smaller funds, which usually complete portfolio trades the same day. Mr. Atkinson said that is the case with the two funds that have been converted. But large funds may need several days to execute significant portfolio changes to avoid moving the market. If an E.T.F. discloses that it has begun buying or selling a particular stock, traders may jump in and do the same to try to take advantage of anticipated price movements.

Another issue that Mr. Powers cited to explain why Vanguard does not offer actively managed E.T.F.s, and would not be inclined to convert actively managed mutual funds, is that there is no way to restrict investment in an E.T.F. If a mutual fund in a frothy market segment attracts too much money, making managing the portfolio unwieldy, the manager can limit new investment, but that isn’t allowed with an E.T.F.

E.T.F. conversions may be limited to smaller funds, but Mr. Cordaro would worry about trying one with anything too small.

“There’s an ongoing downside to smaller, more thinly traded E.T.F.s when you have turmoil in the markets,” he said. “During big down days, when there’s a lot of dislocation or volatility, there can be a big discount” to a fund’s net asset value, “or a big impact on the bid-ask spread,” the difference between the price at which buyers buy and the slightly lower price at which sellers sell.

Whatever size portfolio might be the object of a conversion, Mr. Rosenbluth anticipates more of them after the first have had any kinks resolved and have been shown to be successful.

“We’re likely to see more of these once these pioneering strategies make the effort and we see that investors don’t revolt, and stay within the fund,” he said.

A potential limit on conversions is that “some investors are still comfortable with mutual funds,” Mr. Rosenbluth added. “What I hear from asset managers is they want to give investors choice.”

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Small-cap value stocks rank among the market’s riskiest fare.

But higher risk can bring bigger rewards, and in the first quarter, it did for three of the better-performing mutual funds. Each returned more than 20 percent by betting on small-cap value.

Value investors are betting on stocks that they think are trading below their fundamental worth. Often, companies end up classified this way because they operate in out-of-favor industries or have had setbacks.

Here are some of the choices that enabled three funds to prosper.

Kinetics Small-Cap Opportunities

The Kinetics Small-Cap Opportunities Fund toted up a first quarter return that would have been whopping for an entire year — 60.5 percent. In contrast, the S&P 500 index gave a total return of 6.2 percent for the quarter.

Peter Doyle, one of the fund’s co-managers, said his fund achieved its result thanks to an unusual holding: the Texas Pacific Land Corporation.

Texas Pacific grew out of the bankruptcy of the Texas Pacific Railroad in the 1800s. It owns land and water rights in Texas’s Permian Basin, one of the United States’ leading oil-and-gas-producing locales. The company earns royalties from others’ drilling on its land, and its stock shot up in the first quarter, returning nearly 120 percent.

Until this year, some mutual funds wouldn’t hold Texas Pacific because it was a publicly traded trust, not a corporation. It converted its legal structure in January, though Kinetics has owned it since 2002.

Texas Pacific recently accounted for 43.9 percent of the fund’s assets. It was one of 36 holdings.

Kinetics’s enormous bet is “an outgrowth of our long time horizon and low turnover strategy,” Mr. Doyle said. “Maybe five of our names will be great investments. If you don’t turn over frequently, those five will become a bigger and bigger percentage of the portfolio.”

Mr. Doyle said patience is essential to how he and his co-managers run their fund. He said they view it as an advantage in a business characterized by shorter-term thinking.

Fund managers’ bonuses are often based on annual returns, so they focus on those, he said. “If you can get away from that, you can buy great companies at a discount.”

But a concentrated approach, like Kinetics’s, can increase risk because it reduces diversification.

By at least one measure, the fund is riskier than its peers: Morningstar says the standard deviation of its returns — a measure of their ups and downs — is 35.7 percent, compared with 25.5 for its average peer. A higher number signals more risk.

The fund’s no-load shares have a net expense ratio of 1.65 percent and returned an annual average of 26.4 percent for the five years that ended March 31, compared to 16.3 percent a year for the S&P 500.

He said that’s an outgrowth of his approach, which focuses on companies’ ability to produce free cash flow — that is, cash left over after a company funds its operations and maintains its assets. (Small-cap energy businesses can be speculative and require substantial investment before producing free cash.)

To spot cash spigots, Mr. Kammann ranks the 900 stocks in his investment universe and digs deeper into the better-ranking ones to understand why they’re cheap.

“One of the risks I assume, quite intentionally, is I’m selecting stocks where the market is fearful,” he said. Otherwise, the shares wouldn’t be bargains.

Value hunters are betting that the market is wrong and that their stocks are sturdy enough to outperform lagging industries or bounce back from difficulties.

“The key is that investors have a tendency to overextrapolate good news and bad news,” Mr. Kammann said. “That’s why value investing works.”

Lately, his stock picking has led him to a company helped along by the pandemic: Poly, formerly known as Plantronics, a maker of headsets and other communications equipment.

The company had seen a planned merger collapse and a competitor, Jabro, swipe market share. The stock sank in the early days of the pandemic.

Mr. Kammann sensed a buying opportunity. “We thought the stay-at-home environment would be positive for headsets and that, post-Covid, there was going to continue to be some form of hybrid work. So we redoubled the position.”

The Hartford fund, whose A shares have a net expense ratio of 1.3 percent, returned 23.8 percent in the first quarter.

American Century Small-Cap Value

Free cash flow is also a lodestar for Jeff John, lead portfolio manager of the American Century Small-Cap Value Fund.

It’s one of several measures he considers as he’s screening companies. Others include balance-sheet strength and quality of management.

“We generate a score for each company, and that lets us compare it to other companies in its sector and across the portfolio,” he said. “We want to use data to remove some of the inherent biases we all have.”

Like Mr. Kammann’s approach, Mr. John’s has led him away from such traditional value-centric industries as energy and utilities.

Instead, he has lately found promise in Compass Diversified, which he calls a mini-conglomerate.

Compass, a publicly traded partnership, owns such diverse companies as the Sterno Group, producer of the canned fuel, and 5.11, a maker of clothing and gear for law enforcement and for the outdoors.

Compass’s managers are “incredible allocators of capital,” Mr. John said. “They invest in these businesses and help them grow, and if there’s an opportunity to sell them, they’ll do that.”

In 2019, for example, Compass sold off Clean Earth, an environmental remediation company, and Manitoba Harvest, a producer of hemp foods .

Mr. John also likes Penske Automotive, calling it “one of our core holdings for quite some time.”

Penske is known for its network of car dealerships, but its business is burlier than that, he said. Commercial trucks, via sales and leasing, have recently powered the company’s growth.

“Within the commercial truck space, 70 percent of gross profit comes from the servicing,” he said. “A sale is really just an entree to providing service over time.”

The company’s chairman, Roger S. Penske, makes shareholder interests a priority because he’s a substantial one himself, Mr. John said. “Penske owns 40-percent-plus of the company.”

The American Century Fund, whose investor shares have an expense ratio of 1.25 percent, returned 24.7 percent in the first quarter.

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Crucial bridges are decaying. The electricity grid is straining. And climate change, as it worsens storms, floods and wildfires, is intensifying problems. The American Society of Civil Engineers gave the United States a C– in its latest infrastructure report card.

Help may be coming. President Biden has proposed $2 trillion in new infrastructure spending. A compromise between the president and Senate Republicans would provide about half that, though congressional Democrats are pushing for more.

No matter what happens in Washington, infrastructure challenges will endure, and the need will grow. That may create opportunities for such infrastructure stocks as electric utilities, builders of roads and bridges, and owners of railroads and cellular towers. And the mutual funds and exchange-traded funds that specialize in owning those outfits could benefit.

“There are so many tailwinds right now,” said Josh Duitz, manager of the Aberdeen Global Infrastructure Fund. “Two big ones are renewables and 5G.”

Renewable energy, such as wind and solar power, is needed to meet global climate goals; more cell towers are required for the rollout of fifth-generation — 5G — wireless networks.

If the U.S. government chips in more money, that should only help, Mr. Duitz said.

Of course, an investment opportunity, no matter how tantalizing, doesn’t guarantee gains. The market can rise and fall on wishes and worries; unanticipated woe — be it a financial crisis or a pandemic — can sap it.

“Stocks may be in the infrastructure industry or they may own infrastructure assets,” said Josh Charlson, a director of manager selection at Morningstar. “But the securities themselves are still publicly traded equities and are usually going to share in the trends of the broader markets.”

Aside from the recession induced by the coronavirus pandemic, trends for the sector have been favorable for much of the last decade. Infrastructure stocks have trailed the S&P 500 but put up positive returns while providing higher dividends.

The U.S. dollar-hedged version of the S&P Global Infrastructure Index had an average annual total return of 7.9 percent for the decade that ended June 30, while the S&P 500 returned a 14.8 percent annual average.

But the pandemic, with its traffic-congestion reprieves and aircraft groundings, battered the infrastructure sector: The index slipped 8.2 percent in 2020, while the S&P 500, after a spring plunge, ended up delivering a total return of 18.4 percent. As of June 30, the infrastructure index was up 6.5 percent this year, while the S&P 500 was up 15.3 percent.

“Many infrastructure assets were disproportionately hurt” by the pandemic, said Jay L. Rosenberg, head of public real assets for Nuveen.

Mr. Rosenberg said auto traffic is bouncing back to prepandemic levels, but air travel might not recover for several years.

A growing number of funds invest in infrastructure stocks. Morningstar counts more than 30, up from fewer than 10 a little more than a decade ago.

They typically own shares of what Matt Landy, one of the portfolio managers of the Lazard Global Listed Infrastructure Portfolio, called “regulated monopolies providing essential services.”

“When you’re cooking dinner on a stove or sitting in your office using a computer or driving on a road, you’re using infrastructure,” he said. Pipelines providing natural gas, power lines transmitting electricity and roadways all count as infrastructure.

The 407 ETR, a turnpike skirting Toronto, for example, is operated by a Spanish public company named Ferrovial, a recent top holding of Mr. Landy’s fund.

Investors pondering a bet on infrastructure can opt for an actively managed fund, like the Lazard offering, or an indexed one, like the iShares Global Infrastructure E.T.F. or the SPDR S&P Global Infrastructure E.T.F.

Active funds offer the chance to beat the market or to match it with less jittery returns, while passive ones typically have lower expenses and track market indexes.

The retail shares of Mr. Landy’s fund, with an expense ratio of 1.23 percent, returned an annual average of 10.4 percent over the decade that ended in March. In contrast, the iShares E.T.F., with an expense ratio of 0.46 percent, returned an annual average of 5.5 percent over that period.

One allure of many infrastructure funds is income: In a world of measly interest rates, they often have healthy yields. The average infrastructure mutual fund tracked by Morningstar paid a 12-month yield of 1.7 percent on May 31, while the 10-year U.S. Treasury security was paying about 1.5 percent in early July.

Infrastructure investments are sometimes said to provide inflation protection — something salient with prices lately rising. Common forms of infrastructure income, like tolls and utility rates, often grow with inflation. “For a lot of these companies, their top line is tied to inflation, so they’re able to keep pricing in line with inflation,” said Pranay Kirpalani, manager of the Fidelity Infrastructure Fund.

Yet one analysis concluded that claims of inflation protection didn’t hold up.

Vanguard in 2018 studied the performance of infrastructure stocks over 28 years and found that they didn’t hedge inflation any better than the broader market or real estate investment trusts.

“If your primary objective is inflation protection, commodities might be a better option,” said Aidan Geysen, author of the report and a senior investment strategist at Vanguard.

A reputed benefit of infrastructure that did hold up was risk reduction. Mr. Geysen found that infrastructure stocks were less volatile than the overall market.

If you’re considering an infrastructure fund, be aware that infrastructure stocks and interest rates tend to move in opposite directions, he said. That may matter more in the months ahead: Rates will most likely rise if inflation endures.

“As rates fall, you can get a tailwind,” Mr. Geysen said. “But you wouldn’t expect that that tailwind would persist going forward. As rates normalize, they may well turn into a headwind.”

Another potential peril of an infrastructure bet is doubling down on risks you’ve already taken.

Infrastructure funds usually hold big slugs of utilities and industrial stocks. Those two sectors together account for nearly 80 percent of the S&P infrastructure index. You may already own plenty if you have a broadly diversified portfolio.

Perhaps the main risk of buying an infrastructure fund or E.T.F. is misunderstanding what you’re getting, said Barbara Weber, founding partner of B Capital Partners, an infrastructure investment consultancy in Zurich.

People often talk about infrastructure investing as if they could directly own a piece of a steady source of income like a toll road, she said. A more typical holding of a U.S.-focused fund or E.T.F. would be stock in a big public utility, like Duke Energy or the Southern Company, which run fossil fuel power plants and complex energy distribution networks.

“There you have full-blown market risk and operational risk. There’s nothing bad about that, but I wouldn’t call it safe,” she said. https://nohu.win/ Our user-friendly platform and mobile app make it easy to place bets, track your results, and manage your account on the go.

The markets and the economy continue to reap the benefits of the recovery from the pandemic and its associated recession.

For the most part, new cases of Covid-19 keep falling, and vaccinations, jobs and economic growth keep rising. For a long stretch, the stock market has been rising, too.

After sending stocks to elevated valuations by many measures, investors might wonder whether they have conjured an impossibly bright future in which economic and corporate results remain robust while inflation and the pandemic remain subdued.

Bears are alarmed by the ebullient mood, as you would expect, but some neutral and even bullish investors are uneasy, too. Support for stocks seems broad, but not deep.

“We’re at a 50-year high for equities as a percentage of financial assets, not counting home equity,” said Tobias Levkovich, chief United States equity strategist at Citi Research. “We’ve run too far this year. There’s limited upside and, relatively speaking, more significant downside.”

Sky-high sentiment has been “helped along by powerful monetary and fiscal stimulus,” he said. “That can’t be sustained for a long period of time.”

It was sustained long enough to send the S&P 500 up 8.2 percent in the second quarter. But while that brought the index to almost twice where it was at the low last year, Mr. Levkovich says stocks are not in a bubble.

He does worry, though, that “parts of the market are bubblicious,” such as initial public offerings, which are often at extravagant prices for companies with no profits, and special-purpose acquisition companies, often known as blank-check funds because investors give the managers freedom to buy whatever they like without prior approval.

A sign that some of the froth may already be coming out of the market is that the price of Renaissance I.P.O., an exchange-traded fund that invests in companies after their first week of trading and holds them until they have been on the market for about a year and a half, was recently about 15 percent below its high set in February.

There may not be a marketwide bubble, but Mr. Levkovich considers a 10 percent decline — known in Wall Street jargon as a correction — as “very plausible” this summer. He cites the convergence of four factors: an anticipated signal from the Federal Reserve that it will trim asset purchases; the emergence of profit margin pressures on businesses forced to raise wages; an expectation that inflation will persist; and an increase in corporate taxation.

Jeremy Grantham, long-term investment strategist at GMO, has been saying for months that markets of all sorts are in bubble territory.

Along with “flaky little stocks bid up by individuals getting checks” — a reference to companies like GameStop and A.M.C. whose stocks soared after attracting interest on social media — he highlighted sharp price increases in housing and commodities.

“It’s the first time in history that the U.S. is experimenting with bubbling all its markets at the same time,” Mr. Grantham said.

Kristina Hooper, chief global market strategist at Invesco, is more optimistic, but still cautious.

“Valuations are stretched when we look at metrics relative to history,” she said.

At the end of June, the stock market was valued at 205 percent of the country’s economic output, a high. Just before the market plunged in 2000, the figure was 143 percent.

“But one could argue that they are not at their highest ever because monetary policy is so accommodative,” she said. As long as the Federal Reserve maintains that loose money policy, she said, “it supports stocks.”

Support for them in the second quarter produced a 7 percent gain for the average domestic stock fund tracked by Morningstar. Portfolios that specialize in technology and communications did especially well, while those that invest in energy and defensive sectors like utilities lagged.

International stock funds were up 5.7 percent, with Latin America portfolios particularly strong.

For many investment advisers, the outlook for stocks hinges on the outlook for inflation, which has been rising. The personal consumption expenditure core price index, which is closely tracked by the Fed, rose 3.4 percent in the 12 months through May. That’s the steepest increase since 1991, but the reopening of the economy is a major extenuating circumstance that prompts some to dismiss inflation risk.

“There has been this debate on whether the Fed would lose control of inflation,” said Ron Temple, co-manager of Vanguard Windsor II. “The real debate is which side of 2 percent do we land on. Inflation of 2 to 2.5 percent is not life-changing.”

Ms. Hooper highlighted “a burst of spending in a lot of countries” as pandemic restrictions are eased, but she expects it to abate soon, with economic growth remaining strong. But while she agrees that inflation isn’t a danger, she doesn’t think there is no danger at all.

“I wouldn’t be surprised to see some kind of correction this summer,” she said. And she pointed out that even if the pandemic has been ebbing in the United States, it is far from over.

“Very few people are focused on a resurgence of the pandemic,” Ms. Hooper said. “Whenever a risk is being largely ignored, it’s important to bring to light that it’s a real possibility.”

Mr. Grantham has not been ignoring that risk. He said it “has been worrying the hell out of me.” He put the odds of “another serious wave” at 4 out of 5. If it occurs, he said, it will provide the markets with “a sharp rap around the knuckles in terms of confidence.”

Laird Landmann, co-director of fixed income at TCW, an asset management firm based in Los Angeles, worries about the effects of expansive fiscal policy on financial markets.

“We have $3 trillion deficits,” he said. “If they were to stop them tomorrow, it would be like the Fed raising rates dramatically.” While much of the spending has bolstered the economy, he said, continuing to run such large deficits causes problems, too.

“We may have stomped on the accelerator fiscally a little too hard,” Mr. Landmann said. “It’s hard to break the habit of the federal government spending twice as much as it takes in.”

The prospect of rising inflation and unceasing prodigious spending in Washington did not mute demand for bonds or bond funds. Helped by a decline in the 10-year Treasury yield from 1.74 percent to 1.45 percent, the average bond mutual fund rose 1.8 percent in the second quarter, led by long-term government portfolios and specialists in emerging market and high-yield instruments.

With many investments so expensive that they already may account for all possible good news, some advisers are inclined to be picky, recommending individual securities or narrow market niches.

“A lot of the optimistic outlook is priced in,” Mr. Temple said. “I’m not here to tell you the market will be up X percent in the next year.” Returns will depend, he said, “less on a market call and more on a security selection call.”

Among the calls he is making with his portfolio is for continued strength in big technology companies, such as Microsoft and Alphabet, the parent of Google, for which he expects the earnings backdrop to remain favorable no matter what, and Bank of America, an exemplar of what he calls “responsible growth.” The bank has been able to expand profits at a healthy clip, even as it reduces risk in its lending, by cutting costs substantially.

Reducing risk is a good idea for bond investors, in Mr. Landmann’s view. TCW is shortening the average duration of its holdings and limiting corporate debt exposure. Corporate issues that he favors include companies like General Electric and Kraft Heinz.

Mr. Grantham finds few places to make or even keep money. He recommends emerging-market value stocks as a two-for-one special. Emerging markets are underpriced, historically, relative to American stocks, he said, and value stocks are especially cheap relative to growth stocks.

Ms. Hooper prefers economically sensitive stock market segments, including smaller companies, and European and emerging markets. She foresees a rebound in capital investment, bolstering corporate productivity, which should benefit technology industries, particularly cybersecurity, cloud computing and software services.

But if the pandemic surges again, she would recommend gold, high-quality bonds, cash and defensive corners of the stock market. Such an event is likely to create “significant headwinds for the economy,” she said, prompting investors to “flock to safe haven asset classes.”

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After a remarkably fruitful year in which the stock market shook off rising inflation and coronavirus cases, 2022 began with a decline. It may be the first in a series of ups and downs as Wall Street anticipates moves by the Federal Reserve and copes with the lingering pandemic.

It will be hard for investors to know what to do as the Delta variant gives way to Omicron and whatever variants evolve next. As for the Fed, the evolution of its policy is perplexing the markets, too. 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.

“The markets have come to believe that if there’s a major correction in the equity market, Powell will help them out,” said Komal Sri-Kumar, president of Sri-Kumar Global Strategies. “The result is a seesaw motion in which the market corrects in anticipation of tightening, then the Fed eases and the market goes up.”

After the S&P 500 rose 10.6 percent in the fourth quarter, giving it a 26.9 percent gain for 2021, the index made a marginal new high as 2022 began, then lost ground.

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. The minutes led some investment banks to forecast four rate increases this year instead of three and an earlier start to the process of selling the trillions of dollars of assets bought in the quantitative easing program.

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. Failure to do so could risk damaging the economy, he said, something the markets would be even more sensitive to.

Some investment advisers expect the Fed to become consistently hawkish. Bill Hester, senior research analyst at Hussman Strategic Advisors, said in a commentary on the firm’s website that Mr. Powell had made the case before the pandemic that forceful early action was required when inflation expectations threaten to get out of control.

The Fed may be closer to making that determination than many realize, Mr. Hester said. 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. Moreover, the labor force has been shrinking as fewer people are working or seeking work, which might encourage the Fed to think that full employment can be achieved with a higher unemployment rate.

There is also a benign possibility, which Rick Rieder, head of the global asset allocation team at BlackRock, adheres to, in which inflation ebbs on its own.

“Some tangible changes will kick in, in the second or third quarter,” he said. “Inventory levels are in really good shape” on many goods, “and we should see some alleviation of pressure on energy prices.” Also helping is that consumer price comparisons with a year earlier will be more favorable.

Simeon Hyman, global investment strategist at ProShares, an issuer of exchange-traded funds, is another inflation optimist. He expects Fed tightening to succeed, and he highlighted snippets of data, such as a recent steep drop in the Baltic Dry Index, which measures global shipping rates, to back his case. He anticipates inflation falling to 3 percent, “a number that stocks can digest,” and forecasts S&P 500 earnings to rise 10 percent to 15 percent this year, “enough for stocks to do OK.”

Stocks did better than OK last year. The average domestic stock fund tracked by Morningstar rose 6.6 percent in the fourth quarter and 21.9 percent on the year, although both results lagged the S&P 500 considerably.

A handful of giant technology stocks accounted for much of the market’s return, but tech funds performed only in line with broad stock portfolios. Many of the best sector funds focused on financial services and natural resources.

International stock funds had an ordinary year, rising 7.9 percent, including 1.9 percent in the fourth quarter. There were vast differences in results geographically, with specialists in Europe and India greatly outperforming and Latin America and China funds showing losses.

Much of how 2022 unfolds will depend on the coronavirus and the response to it. If evidence continues to pile up that Omicron is more transmissible than other variants, but milder, it could show the way out of the pandemic. 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.

In response to the coronavirus, the Fed created trillions of dollars out of thin air, Congress doled out trillions more, and the pandemic provided a tacit guarantee that interest rates wouldn’t rise. 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. At the same time, stocks and bonds are very expensive, limiting prudent investment options.

“There’s no place to hide,” Melda Mergen, global head of equities at Columbia Threadneedle Investments, said during a presentation of the firm’s 2022 outlook. “Most of the markets are at the top of the bar in their current valuations.”

She remains bullish toward stocks but emphasizes pockets that are less expensive, such as smaller companies and value stocks. She noted, though, that the valuation gap between growth and value stocks has narrowed, so the pickings are slimmer.

Other investment advisers also recommend looking for less overpriced market segments, but they differ on where to find them. Mr. Sri-Kumar likes European stocks more than American ones, and he would buy emerging markets, such as India, that do not depend on strong growth in China, where he foresees growing risk in 2022.

Ian Mortimer, a co-manager of the Guinness Atkinson Global Innovators fund, suggests owning “quality defensives,” stocks in industries that feature rising dividends. Some examples are British American Tobacco, Imperial Brands, which also sells tobacco, and the insurance company Aflac.

For Mr. Hyman, “the view for stocks is a lot better than the view for bonds.” He said the financial, energy and materials industries tend to do well when interest rates rise.

If stocks do better than bonds in 2022, it will mean more of the same for fund owners. The average bond fund was flat in the fourth quarter and up 1 percent for all of 2021. The standout niches, each returning about 5 percent on the year, held bank loans and high-yield bonds.

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. He predicts low-double-digit gains for the S&P 500.

But he tempers his optimism with concern that inflation might not abate and that the Fed has instilled “a sense of complacency in the markets.”

“That’s going to make their job a lot harder from here,” he said, adding, “If they waited too long and have to brake hard on the other side, it will cause the markets to go down hard.”