Last week, the S&P 500 hit a 66. hitth The year’s record high, and those who started the year with a bearish outlook, can probably wait until the year ends. In annual survey Shares were expected to rise 9% by the end of 2021, according to Wall Street strategists from December 2020. The highest target for the S&P 500 was 4800, while the lowest target was 3950. Monday’s close of 4682 in the S&P 500 was up 5.6%. Average target at 4433, a 24.9% year-over-year increase.
On many topics, the strategist’s outlook on inflation, monetary policy and COVID-19 has been correct, but the stock is still trading higher. One would think that analysts would be more bullish in 2022, but it is not. Most have expected a slowdown in the economy and earnings for a good part of 2021, but since that hasn’t happened, it’s impacting their targets for 2022.
Businesshala year-end survey Economists’ average estimate of growth is only 3.0% from current levels, “the least optimistic outlook behind only 2019 in two decades of data”. In 2019, the S&P 500 was up 28.9%.
So what are their concerns?
Savita Subramaniam, strategist at Bank of America, says, “1 percentage point [increase] The discount rate could send the S&P 500 into a tailspin that takes it to 3,600. In addition to the rate hike, there are concerns over declining US economic growth and therefore declining corporate earnings. Some are expecting S&P 500 profit growth to weaken to 8%.
The daily chart of 10-year T-Note yields showed a significant rise in yields on Tuesday, closing at 1.625%. A test of resistance at 1.687% (Line A) looks more likely, and a breakout will take the markets by surprise.
On 9 November, yields closed for a day before closing below support (line B). The Daily Moving Average Convergence-Divergence (MACD) line and MACD-Histogram have now turned slightly positive, while the weekly indicators are also in favor of higher returns.
Morgan Stanley has one of the more negative outlooks for 2022, as “the base-case target of 4,400 is likely to decline by 5%”. Interestingly, his chief US equity strategist Michael Wilson still expects S&P 500 earnings to be solid, but he is looking for better growth in Europe and Japan.
The STOXX Europe 600 tracks the returns of 600 of the largest stock exchange-listed companies from 17 European countries, including the United Kingdom. From the November 9 lows, it is up 8.9% compared to last Friday’s close. It also formed a Doji, so a weekly close below 485 could indicate a correction. The weekly MACD line and MACD-histogram are only positive but may turn negative with two consecutive lower weekly closes.
The weekly chart of Japan’s Nikkei 223 index does not look as weak as the STOXX 600 in the near term. The index has been in a trading range (lines A and B) for the entire 2021. A strong close above resistance at 30,783 would project a move into the 35,000-36,000 area. The weekly MACD line for Nikkei is trying to break out of the downside as they are slightly positive.
Not all strategists are negative when it comes to the projections for 2022. Goldman Sachs Group (GS) has a year-end target of 5100. They expect continued high levels of corporate buybacks, with total demand for US equity from both corporations and individuals totaling $550 billion.
Brian Belsky, BMO’s chief investment strategist and issuer of the fastest 2021 estimate, believes other analysts’ concerns will push the market higher in 2022, but not as much in 2021 as with one. Year-end target of 5,300,
Of course, the biggest problem with these forecasts is their fixed expiration date: it’s not just whether the market will reach these levels in 2022, but whether they’ll close out the year. If the S&P 500 were to reach 5,300 in June 2022, and then fall to 4,600 by December, most would not reward Brian Belsky for his exact upside target.
We should have forecasts from all the leading strategists by the middle of next month, so stay tuned for a continuous analysis of the year ahead. We should have more data to add to the growth versus value debate over the next few weeks.