Introduction
It’s the time of the year where wall street analysts are busy trying to offer their two cents worth in terms of predicting what 2022 might bring for the US stock market.
Many institutional investors, hedge funds and professional traders rely on their market outlooks to help them navigate and plan their 2022 trading and investing roadmaps.
In this article, we plan to share with you the 2022 predictions offered by 6 separate Wall Street Analysts!
The table below summarises the S&P 500 price target for the end of 2022:
| Analyst Name | S&P 500 2022 Target | Market Direction |
| Morgan Stanley | 4400 | Down |
| BofA Global Research | 4600 | Sideways with slight bearish undertone |
| RBC | 5050 | Sideways with limited upside |
| Goldman Sachs | 5100 | Sideways with limited upside |
| Credit Suisse | 5200 | moderate upside |
| Wells Fargo | 5100 – 5300 | Cautiously bullish |
https://www.reuters.com/business/wall-street-analysts-2022-outlook-sp-500-2021-11-16/
Morgan Stanley’s 2022 Prediction
Morgan Stanley is predicting that the S&P 500 will move lower next year in 2022 to around 4,400 for the S&P 500 which implies an approximate 8% pullback compared to 2021 (assuming 2021 closes at 4,800).
Their base case assumes that while corporate earnings will still remain solid, they will be significantly impacted by supply chain issues and higher inflationary cost pressures.
This will inadvertently result in slower growth rates for earnings per share, with many of the S&P 500 component stocks already highly valued, in comparison to global peers.
Hence, Morgan Stanley is seeing more investment opportunities in lower valuation and high quality stocks, especially those in Europe and Japan.
Chief U.S. equity strategist Michael Wilson
“While earnings for the overall index remain durable, there will be greater dispersion of winners and losers and growth rates will slow materially… 2022 will be more about stocks than sectors or styles, in our view.”
BofA Global Research 2022 Prediction
BofA is predicting that the S&P 500 will move lower next year in 2022 to around 4,600 for the S&P 500 which implies an approximate 4% pullback compared to 2021 (assuming 2021 closes at 4,800).
The key takeaways from BofA’s research are:
1
Due to growing inflation, they believe a rate shock will dampen both equities and bonds.
2
Higher rates will result in lower corporate earnings will serve as a negative backdrop for asset markets.
3
Corporations investing more in their employees will be a key theme over the next 10 years.
Chief Investment Strategist Michael Hartnett
“And really if you think about 2021, the main theme was an inflation shock. And by nature, that should be followed by a rates shock, which we think will be the key theme going into 2022.”
RBC 2022 Prediction
RBC is predicting that the S&P 500 will move slightly higher next year in 2022 to around 5,050 for the S&P 500 which implies an approximate 5% positive return compared to 2021 (assuming 2021 closes at 4,800).
Their outlook for 2022 features worthwhile global equity returns and moderate earnings growth, supported by above-average GDP growth and strong consumer and business capital spending.
Major central banks seem set to begin raising interest rates, yet equity markets typically perform well surrounding the first rate hike.
Furthermore, even as rates inch higher, RBC are expecting them to remain rather low by historical standards. These factors should make equities the asset class of choice once again in 2022.
Vice President, Portfolio Analyst Portfolio Advisory Group – U.S. Kelly Bogdanova
“Above-trend GDP growth should set the stage for moderately higher U.S. earnings growth and stock prices in 2022. The inflation, supply chain, and labor headwinds should gradually dissipate as we move further away from the peak of the COVID-19-related disruption, but are unlikely to fully abate. We think most industries and leading companies will continue to manage around these headwinds by containing costs and using technology to support productivity. The S&P 500 consensus earnings forecast of $221 per share for 2022 seems achievable and has potential for upside, in our view, so long as new COVID-19 variants do not seriously disrupt economic momentum.”
Goldman Sachs 2022 Prediction
Goldman Sachs is predicting that the S&P 500 will move slightly higher next year in 2022 to around 5,100 for the S&P 500 which implies an approximate 6% positive return compared to 2021 (assuming 2021 closes at 4,800).
Goldman Sachs is of the opinion that the combination of decelerating economic growth coupled by a tightening Fed and rising real yields will suggest that investors should expect modestly below-average returns next year.
Chief U.S. equity strategist David Kostin
“We expect that these gains will be driven primarily by earnings per share growth of 8% combined with a stable P/E multiple. This pattern would be consistent with the decomposition of returns usually seen at this point in the business cycle and would mimic the pattern of this year, where earnings lifted the market to record highs while the index multiple actually contracted.”
Credit Suisse 2022 Prediction
Credit Suisse is predicting that the S&P 500 will move moderately higher next year in 2022 to around 5,200 for the S&P 500 which implies an approximate 8% positive return compared to 2021 (assuming 2021 closes at 4,800).
Credit Suisse is of the opinion that their constructive outlook is based on robust projections for economic growth in both real and nominal terms, further margin upside in cyclical groups, a pickup in buybacks and a favorable discount rate despite Fed tightening.
Global Chief Investment Officer Michael Strobaek
“In light of the continuing economic recovery, we expect equities to deliver appealing returns in 2022, warranting sufficient exposure to the asset class in portfolios. Given only meager expected returns in fixed income, investors should look to strategies that follow non-traditional patterns to diversify their opportunity set. Given the accentuating climate crisis, policy is bound to become more climate-focused. This is a development that investors must factor into their investment decisions.”
Wells Fargo 2022 Prediction
Wells Fargo is predicting that the S&P 500 will move higher next year in 2022 to around 5,100 – 5,300 for the S&P 500 which implies an approximate 6 – 10.5% positive return compared to 2021 (assuming 2021 closes at 4,800).
Wells Fargo is of the opinion that while pressures from higher inflation and supply shortages next year could hinder the economic recovery, there will still be above-average growth and gains for stocks in 2022. The bank recently upgraded its S&P 500 forecast from the 4,900 to 5,100 range, citing earnings as the “major driver of equity returns going forward.” While multiples will continue to expand, the firm doesn’t yet see any major risk of contraction given how low interest rates are.
Conclusion
2022 is looking like it is going to be an interesting year.
One thing appears to be certain, if all the Wall Street Analysts’ predictions are true – Investors should not be expecting double digits returns next year!
In fact, the range of predictions for next year are so varied, from Morgan Stanley being fairly bearish to Wells Fargo still being moderately bullish.
It goes to show that 2022 will be range bound and investors and traders should not expect too much by investing in market returns such as ETFs, Mutual Funds and Unit Trusts.
Disclaimer: Please note that all the information contained in this content is intended for illustration and educational purposes only. It does not constitute any financial advice/recommendation to buy/sell any investment products or services.
If you find trading extremely difficult or are worried and not confident you can achieve portfolio profitability in 2022 – please rest assured you are not alone in feeling that way.
In fact, based on the above article many professional traders, analysts and stock investors are getting ready for a tough 2022! The reason is because the stock market has run up a lot since the Covid lows, and the stock market is overpriced with high valuations. Coupled with the Fed making financial less accommodative than we had seen in the past 2 years, the only natural thing is for the stock market to take a break.
Therefore, the US stock market is expected to either trade sideways or in the worst case, experience a correction in 2022.
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