‘Proceed with care,’ say Wall Street analysts, as they forecast the stock market in the United States in 2022.
As investors grapple with an inflection point in monetary policy in the world, the current rise in market volatility may portend a bumpier U.S. stock market in 2022.
In a phone interview, Shawn Snyder, head of investment strategy at Citigroup’s U.S. consumer wealth management business, said, “There probably will be some higher volatility surrounding the anticipated tightening of Fed policy.” The new coronavirus type “throws a wrench” into the 2022 prognosis, he said, but investors have been buoyed by some early indicators that it may be less harmful than initially anticipated.
According to FactSet data, the CBOE Volatility Index VX00, -13.51 percent, or VIX, spiked in late November and remains above its 200-day moving average after declining since last week. According to the data, the VIX broke above 30 for the first time since the first quarter of 2021, amid market fears over the development of omicron and the possibility that the Federal Reserve will take some easing from the market sooner than expected.
In a phone interview, Lauren Goodwin, economist and director of portfolio management at New York Life Investment, said, “That’s a major transformation that causes anxiety for investors.” Increased inflationary pressure is likely to mean more rate hikes in 2022 than currently forecast, producing more market risk, she said, and the Fed appears to be planning for more flexibility for prospective interest rate hikes next year.
Some investors fear that if the Fed tightens its monetary policy forcefully through rate hikes, interest rate-sensitive growth and technology equities will be particularly susceptible. According to FactSet, the S&P 500 index, SPX, +0.31 percent, which has a big tech component, is on course for a third straight year of robust gains after increasing about 25% in 2021 through Tuesday.
According to Jeffrey Kleintop, chief global investment strategist at Charles Schwab, the US stock market will likely provide more modest gains “associated by more volatility” next year.
In a 2022 forecast study released Wednesday, JPMorgan Chase & Co. strategists wrote, “Most of the equity upside should be realized between now and the first half of 2022, when monetary and fiscal policy tailwinds will be highest.”
Wall Street firms have begun releasing their S&P 500 estimates for 2022, with Goldman Sachs Group and JPMorgan among the most positive on American markets.
According to a portfolio strategy study report from Goldman dated Dec. 3, the S&P 500 will end 2022 at 5,100. Meanwhile, JPMorgan analysts forecast in a research paper released at the end of November that the S&P 500 index would rise to 5,050 next year, owing to “strong profits growth” and improved supply chain issues.