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Tom Lee of Fundstrat said that the stock market will rise for the fourth year in a row in 2022.
The S&P 500 is expected to rally by the end of next year, with big swings in the first half.
Fundstrat expects the S&P 500 to rise in 2022.
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Tom Lee of Fundstrat said that the S&P 500 will rise at least 11% to 5,100 in 2022, marking its fourth consecutive calendar year gain.
In a presentation to clients on Tuesday, Lee said he expects the upcoming election year to be bumpy in the first half, with a 10% decline likely. There will likely be a surge in COVID-19 cases, as well as investor concerns about a hawkish Fed.
Lee thinks that stocks will set records in the second half of the next decade as inflation flattens out, labor tightness eases, and the Fed band aid is pulled off.
The base case for a 5,100 year-end price target is created by those factors.
Lee summarized that economic growth remains robust.
Lee's bullish stock market forecast is based on three key reasons.
Inflation is not permanent.
According to Lee, inflation should begin to normalize in 2022. Lee pointed to a surge in prices in used cars, new vehicles, and home furnishings, among others. Inflation should retreat as the supply chain gets normalized.
Data for the midterm elections.
Market volatility is possible as investors consider the legislative plan in Washington, D.C.
If Democrats keep control of both chambers of Congress, the stock market will perform well. In both scenarios, the stock market fell between 5% and 7% in the first half of the year, before bouncing back in the second half of the year with a return of 18%.
"Guaranteed TINA"
There is no alternative. Over the past decade, that has been a driving force for stock prices as investors have few options to invest their money with interest rates near historic lows. TINA could become "guaranteed" in 2022, according to Lee. Most fixed income securities will likely lose money if inflation goes above 3%.
There are risks.
There are still big risks to the stock market that could throw off Lee's bullish projection, including a Fed policy error, continued supply chain glitch, and more variant of COVID-19.
Business Insider has an original article.
