Stocks are well on their way in 2021, with the S&P 500, the broadest measure of US stocks, at a new record high and many strategists see the momentum continuing into the new year, but not without some bumps.
|SP500||S&P 500||4725.79||+29.23||+ 0.62%|
“I think we have to get through a profit period or two to prove that both businesses and consumers are as adaptable as they were during that first wave of the COVID virus. I think we could gradually grind higher, maybe if we’re lucky, get “to 5,100 next year,” said UBS managing director and senior portfolio manager Jason Katz to FOX Business.
MIXED MESSAGES FROM THE MARKET: JASON KATZ FROM UBS
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|IVV||ISHARES TRUST CORE S&P 500 ETF||472.63||+2.88||+ 0.61%|
|FLIGHT||VANGUARD INDEX FONDS S&P 500 ETF SHS||432.64||+2.65||+ 0.62%|
Like Katz, the BNP Paribas teams see the S&P 500 hit 5,100 while the Wells Fargo Institute’s target is 5,300, an increase of 7.9% to 12% from current levels.
“We anticipate that consumer-centric strength in the US will serve as the global growth engine through the first half of 2022,” wrote the Wells Fargo Institute team.
The S&P is up 26% this year at the closing price of Christmas week.
S&P 500 YTD + 26%
WHERE INFLATION HITS CONSUMERS HARDEST
But everyone agrees that with ongoing inflation, the Omicron variant, a Federal Reserve in tightening mode, and the supply chain crisis, profits may not come as easily as 2021.
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“We don’t think the valuations or the Fed hike will derail the stock market rally. However, should we see a deterioration in the supply chain picture, it could create an environment where the Fed hike and valuations become more problematic, ”wrote Greg Boutle, Head. by BNP of US Equity Derivatives Strategy and Maxwell Grinacoff, Equity Derivatives Strategist.
JEROME POWELL AGAINST TURBULENT 2022, WHILE FED is walking a tightrope on an economic scale
As for the Fed, many agree that policymakers are unlikely to shake the boat for now anyway and hold on to their announced course of three planned rate hikes for 2022 when the taper subsides.
“Although the Federal Reserve will expire its bond purchase program in 2022, we expect general monetary policy to support stock prices. Fiscal policy should have less tailwind and mid-term elections could raise market sentiment concerns, ”the Wells Fargo Institute team wrote.
COVID-19 PILL: WHAT YOU SHOULD KNOW
While the Omicron variant remains a wildcard, the fight against the virus shifted into high gear in late December when the Food & Drug Administration first approved Pfizer and Merck’s COVID-19 pills while other vaccine makers Moderna increased production, to cover the third booster demand with the possibility of a fourth in 2022.
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|MRK||MERCK & CO. INC.||75.73||-0.43||-0.56%|
“Then when we go into next year, we need to see what the data is showing from all sorts of different centers, academic independence centers around the world. Do we need a fourth dose, a fourth booster? Then when will we need them? ? How do we want to use an Omicron specific booster? I think these are questions we just don’t have the answers to, “said Chief Medical Officer Paul Burton to Neil Cavuto of FOX Business in late December.