The bull market that began in March of 2020 has already returned more than 114% in the S&P 500 for index fund investors. After a year like 2021, when the S&P 500 rose more than 27%, investors might be hoping that the trend will continue in 2022. But making predictions about the stock market is always a tricky business, and 2022 is no exception.
Here is what Wall Street strategists are forecasting for 2022:
- On the low end, Morgan Stanley has a year-end target for the S&P 500 of 4,400, which means that the index might decline almost 9% from the current levels.
- On the positive side Wells Fargo forecasts that the index could hit 5,300 in 2022, delivering another year of strong gains.
- Analysts who cover individual stocks have a similarly optimistic outlook. When their 2022 price targets for all companies in the S&P 500 are factored together, they see the index closing out 2022 at 5,225, according to data compiled by FactSet.
Inflation forecasts:
"While supply-chain and related inflation headwinds could linger into the first half of 2022, we expect both to ease after midyear," said the Wells Fargo Investment Institute in its 2022 Outlook report. "We expect inflation to moderate from current levels in 2022 but to remain above recent historical norms." It's a view that other firms like Goldman Sachs and Morgan Stanley seem to unanimously share heading into the new year. Most investment banks expect inflation to diminish from its current high levels as supply-chain problems ease, but they predict it will still remain elevated compared to recent historic levels.
Favored sectors in 2022:
- Bank of America: According to BOA Energy and Financials offer inflation-protected yield, while Healthcare offers Growth/Yield at a Reasonable Price.
- Goldman Sachs: Company issued the following recommendations for investors: 1. Own virus- and inflation-sensitive cyclicals; 2. Avoid high labor cost firms; 3. Buy growth stocks with high margins vs. low margin or unprofitable growth stocks. Goldman Sachs also mentioned that they will be overweight in Technology, Financials, and Healthcare.
- JPMorgan: in light of recent pullback, JPMorgan prefers reflation-sensitive sectors—Energy and Financials (over Staples and Utilities), Consumer Services (over Consumer Goods), Healthcare (over other defensive sectors), and Small-caps (over Large-caps). JP Morgan analysts have also mentioned that at current prices, Travel, Leisure & Experiences theme has an extremely attractive risk-reward.
- Morgan Stanley: While Morgan Stanley’s primary theme for 2022 is to focus more on stocks than sectors, they have still mentioned sectors that they are overweight: Healthcare, Real Estate, and Financials.
- Wells Fargo: "We favor U.S. large-cap and mid-cap equities over international equities, and cyclical and growth sectors over defensive sectors. Favored equity sectors: Communication Services, Financials, Industrials, Information Technology."
Some of the stocks that are expected to outperform the market in 2022 according to wall street analysts:
- Charles Schwab - Based on 10 Wall Street analysts offering 12 month price targets for Charles Schwab price of SCHW has 13.91% upside
- Applied Materials - Based on 15 Wall Street analysts offering 12 month price targets for Applied Materials price of AMAT has 10.12% upside
- Johnson & Johnson - Based on 7 Wall Street analysts offering 12 month price targets for Johnson & Johnson price of JNJ has 10.97% upside
- Chevron - Based on 17 Wall Street analysts offering 12 month price targets for Chevron price of CVX has 15.09% upside
- Alphabet - Based on 28 Wall Street analysts offering 12 month price targets for Alphabet Class A price of GOOGL has 16.28% upside
- General Motors - Based on 13 Wall Street analysts offering 12 month price targets for General Motors the price of GM has 27.2% upside
- Salesforce.com - Based on 25 Wall Street analysts offering 12 month price targets for Salesforce the price of CRM has 33.96% upside
- Twilio - Based on 19 Wall Street analysts offering 12 month price targets for Twilio the price of TWLO has 60.16% upside
- Fisker - Based on 7 Wall Street analysts offering 12 month price targets for Fisker the price of FSR has 71.65% upside
- Under Armour - Based on 17 Wall Street analysts offering 12 month price targets for Under Armour the price of UAA has 52.48% upside
Top IPO’s expected to hit the market in 2022:
- Lime - Potential 2022 IPO valuation: $1 billion to $4 billion
- Impossible Foods - Potential 2022 IPO valuation: More than $7 billion
- Reddit - Potential 2022 IPO valuation: More than $15 billion
- Discord - Potential 2022 IPO valuation: More than $15 billion.
- Instacart - Potential 2022 IPO valuation: $39 billion
- Databricks - Potential 2022 IPO valuation: More than $38 billion
- Chime - Potential 2022 IPO valuation: $35 billion to $45 billion
- Stripe - Potential 2022 IPO valuation: More than $100 billion
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