The S&P 500 beat both Dow, and Nasdaq in 2021 by the widest margin in 24 years. Here’s what history says happens in 2022.

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While the music was playing, the investors danced, reciting a line from the former Citigroup C,
-0.07%
CEO Chuck Prince.

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Buyers of US stocks have danced to the tune of record growth for the broad-market S&P 500 index in 2021 and are eager to spot clues in the year ahead that many expect to be filled with uncertainty, even if Let’s start worrying about the epidemic. take off

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For Wall Street, an interesting question might center on the S&P 500 SPX,
-0.26%‘s
Performance in 2022, after the Dow Jones Industrial Average outperformed the DJIA of the popular stock-market benchmark,
-0.16%
8.16 percentage points and the technology-laden Nasdaq Composite Comp,
-0.61%
Last year was 5.50 percentage points, marking the widest margin of outperformance by the S&P 500 against both of its peer exchanges in the same calendar year since 1997, according to Dow Jones market data.

With previous events in 1984, 1989, 1997, 2004 and 2005, this is only the sixth time the S&P 500 has outperformed the Dow and Nasdaq in one year.

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Although this represents a small sample size, gains in the following year have been healthy. In fact, all three benchmarks are trending higher. The S&P 500 averages a 12.6% return, the Dow averages 11%, and the Nasdaq Composite averages a positive return of 12.8%.

Another separate concern from bullish investors is the extent to which the S&P 500 could continue to rise in 2021 after its 26.89% run-up. Is there more room to run?

History shows that after the benchmark has gained at least 20%, returns are comparatively muted, but not insignificant, with an average increase of 7.7%.

The year after a major rally is also followed by a positive ending for the index over 70% of the time in the subsequent calendar year. There have been nine consecutive gains in the past that the S&P 500 has posted growth of 20% or better.

dow jones market data

Of course past performance is no guarantee of future results, and like 2022, 2021, will be replete with specific themes, including the struggle with the pandemic, the fight with inflation running at its highest level in 40 years, and the Congressional midterm election . in November. It’s hard to predict what the driving force will be, but the promise of healthy corporate earnings and better days to come has been a sign of a general uptick over the past years.

However, optimism can be somewhat cold.

Many Wall Street firms are forecasting high-single-digit returns for the S&P 500 in 2022, if returns are to be had at all, with Credit Suisse forecasting a year-end end of 5,200 for the index, meaning that over 9% growth; And Morgan Stanley is predicting 4,400 finishes, or about an 8% drop.

Reading: S&P 500 could end ‘pretty flat’ in 2022 amid previously ‘unthinkable’ negative real rates, says BofA strategist

Whatever the inflation may be but transient and a pandemic that some expected last year would be in the rearview mirror in 2022, the outlook is still clouded.

That said, the market likes worries, having traversed a monstrous wall of worries over the past three years to post double-digit returns.

The question is, when will the music for the bulls stop?

Ken Jimenez contributed to this article

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