{"id":10091,"date":"2022-01-06T16:05:05","date_gmt":"2022-01-06T16:05:05","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=10091"},"modified":"2022-02-26T13:05:36","modified_gmt":"2022-02-26T13:05:36","slug":"mitchs-market-outlook-for-2022","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/mitchs-market-outlook-for-2022\/","title":{"rendered":"Mitch’s Market Outlook for 2022"},"content":{"rendered":"\n

Isa G. from Plano, TX\nasks: <\/em>Happy New Year, Mitch! My question is pretty simple and\nstraightforward, just curious if you have some thoughts on the outlook for\n2022. What can investors expect, look for, etc.? Hope you had a wonderful\nholiday season!<\/p>\n\n\n\n

Mitch\u2019s Response:<\/strong><\/p>\n\n\n\n

Thank you for writing, and Happy New Year!<\/p>\n\n\n\n

In looking ahead to 2022, investors should focus on the same\nfundamental factors that I\u2019d recommend analyzing every year \u2013 earnings,\ninterest rates, inflation, and economic growth. Across each of these factors, I\nsee mostly moderating forces in the United States, what I might term a\n\u2018normalization\u2019 of economic fundamentals.<\/p>\n\n\n\n

On the earnings front \u2013 which long-time readers know I\nconsider to be the most important factor for stock market returns \u2013 I think\ncorporate earnings will remain strong in response to the tight labor market,\nrising wages, and pent-up consumer demand for services. The pandemic shifted\nspending a great deal towards goods and away from services, and I think we\ncould see a pendulum swing in the other direction as pandemic risk fades.1<\/sup>\n<\/p>\n\n\n\n

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That being said, comparisons in 2022 will be tougher given\nthat 2021 was a considerably strong year for U.S. corporations across the\nboard. So, I\u2019d expect moderating earnings growth rates and <\/em>moderating earnings surprises, which could ultimately mean more\nmodest stock market returns (though still positive, in my view). The chart\nbelow looks at forward-looking quarterly estimates for S&P 500 companies,\nwhich you can see leveling off: <\/p>\n\n\n\n

\"\"
Source: Zacks Investment Research3<\/sup><\/em> <\/figcaption><\/figure>\n\n\n\n

Inflation is another factor I think will see some moderating\nforces in 2022. Rising prices were obviously the big story in 2021, due to\nimbalances caused by supply chain issues being met with robust consumer demand.\nComparisons to 2021 also made the inflation numbers look very big. In my view,\nconsumer demand for goods should moderate as supply chain issues become\nincreasingly resolved, and should take some pressure off of rising prices. A lack\nof additional fiscal stimulus should help, too. <\/p>\n\n\n\n

We know today based on late 2021 Federal Reserve meetings\nthat interest rate hikes are planned for 2022, but in my view, we should not\nsee interest rates rise to the point that the equity risk premium (which values\nstocks relative to the 10-year U.S. Treasury) makes stocks unattractive. I\nthink the 10-year U.S. Treasury would need to rise to about 3% in order to\ncompete with stocks on a risk\/reward basis, and I do not see that happening in\n2022. <\/p>\n\n\n\n

Bottom line \u2013 I think 2022 will be a positive growth year\nfor the U.S. economy and for corporate earnings, but tough comparisons with\n2021 and moderating forces will make some of the positive surprises more\nchallenging to come by. That does not mean stocks will suffer, but I do think\nit means investors will be challenged to identify individual stocks poised to\ndeliver better-than-expected earnings.<\/p>\n\n\n\n

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If you have $500,000 or more to invest, get this guide to\nlearn our ideas on the step-by-step process of building and maintaining a\nretirement portfolio that will potentially help you reach your goals and enjoy\na secure retirement.<\/p>\n","protected":false},"excerpt":{"rendered":"

After the challenges\u2014and strong corporate earnings\u2014of 2021, what’s ahead for the economy and market this year?<\/p>\n","protected":false},"author":3,"featured_media":7436,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[66,71],"tags":[],"class_list":["post-10091","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitchs-mailbox","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/10091","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=10091"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/10091\/revisions"}],"predecessor-version":[{"id":10224,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/10091\/revisions\/10224"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=10091"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=10091"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=10091"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}