IANS/Wang Ying
The stock market will likely see more upside in the years to come.
Bullishness is from earnings momentum and easy Fed policy.
The three reasons why investors should expect continued stock market gains next year are listed by the bank.
After three years of stellar stock market returns, investors should be prepared for more of the same in 2022, according to the quant guru at JP Morgan.
He outlined three reasons why he thinks the S&P 500 will continue to rise next year.
"We continue to see upside in equities on better than expected earnings growth, China/emerging market backdrop improving, and normalized consumer spending habits," said Kolanovic.
"Forward consensus estimates are once again conservative at mid-digit growth rates across major markets," he said. The strong economy that has taken hold post-pandemic doesn't line up with the lackluster earnings estimates, nor does it reflect elevated household savings or expanding labor markets, according to the note.
If China pivots from its recent regulatory policy to a more business friendly stance, or if the US-China trade war eases, earnings could grow even further.
Despite the Fed's decision to speed up its monthly bond purchases and the Bank of England's decision to raise interest rates, the central banks will continue to be supportive of the economy.
"We expect central bank policy to remain broadly accommodative despite Fed tapering, with an additional $1.1 trillion in global developed markets central bank balance sheet expansion through the end of 2022, and a more dovish Fed relative to current market expectations ahead of US midterm elections," he said.
He doesn't care about rising inflation as he sees it as more of a rotation rather than a broad-based acceleration. Corporations should step in with supply next year to help limit further price increases.
Capital investment, inventory re-stocking, shareholder return, and M&A activity should continue to be driven by record corporate liquidity.
The S&P 500 could hit 5,000 in the first half of 2022, according to a prediction by JP Morgan last month.
Business Insider has an original article.
