Lucas Jackson.
According to a Monday note from JP Morgan, the bull market in stocks has plenty of gas left in the tank.
The analysts highlighted five positive catalysts that the bank advised its clients to stay bullish on. The strength should continue on continued economic growth across the globe, despite the impressive run in stocks.
The S&P 500 surged 27% in the year 2021, extending a three-year streak for stocks despite a global pandemic and periods of economic shutdowns. The bull market should last well into 2022, according to JP Morgan, as the economy continues to grow and accommodative policies from the Federal Reserve and governments remain in place.
1. Economic growth continues.
The pace of growth is likely to be stable into 2022, with a number of areas of concern diminishing. The bank expects real GDP growth to be above the long-term trend in Europe in the year 2022. The bank said that fiscal support from governments remains in place while credit spreads are showing no signs of stress.
2. The Federal Reserve.
"Fed is unlikely to keep moving further and further into hawkish territory in the first half of 2022, at least relative to what is priced in currently," the bank said. According to the note, the bank believes headline inflation is likely peaking and will result in steeper curves for stocks.
3. Earnings growth will continue.
We believe that the consensus projections will prove too low, and that gains for earnings will continue. The fourth quarter of the year is expected to be below the third quarter. The Q4 reporting season is likely to have strong beats.
4. In 2021, valuations were slashed.
P/E multiples are elevated, but not equity yields. There was some P/E compression last year and we expect it to be mild and benign in the years to come. The cushion before rising yields is significant.
5. Favorable technicals.
The bank said that the stock market tends to perform well at the start of the year.
Business Insider has an original article.
