Time.news – The first week of 2022 for the stock market could still be positive, but then experts predict that the stock exchanges will begin to slow down. “To weigh – explains Antonio Cesarano, global strategist of Intermonte Sim – will be two factors. The action of the central banks, which has become more aggressive to fight inflation. And the slowdown of the economy, which at the moment is still almost imperceptible , but that could become stronger in the second quarter of 2022 “.
“I therefore foresee a volatile first quarter for the markets – adds Cesarano – In the first three months of next year the central banks will only think about inflation and will start to raise rates. However, for the second quarter I foresee a slowdown in the restrictive maneuvers of the central banks. , who will start to worry more about economic growth and less about inflation. “
How will Wall Street fare in 2022?
The S&P 500 was up 27% in 2021, following a 16% rise in 2020 and a 29% rise in 2019. Despite the pandemic in 2021, the S&P has risen to the top since 1995, closing 77 times at a record high. At the sectoral level, energy and real estate shine, with gains of around 40% for both. The Dow Jones was up nearly 19% this year and the Nasdaq over 21%.
For 2022, experts expect a slowdown. The reason? According to the Wall Street Journal, the expected hikes in interest rates by the Fed will reduce equity indices. When rates are low, in fact, investors tend to focus on risky assets such as stocks, while when inflation accelerates and central banks raise rates, the value of companies’ future earnings decreases and investors find alternative ways of making money. money.
“We have seen extraordinary gains in recent years. And this is not normal,” said Joseph Amato, president and director of equity investments at Neuberger Berman. “It has been an extraordinary period of returns and our expectation is that we will not see such performances in 2022”.
Obviously the analysts’ forecasts heard by the WSJ diverge from each other. So let’s see what the main trends are. For the S&P 500 in 2022, 13 banks and financial services companies expect the index to stand at 4,940 points next year, up about 4.5% above the level at the end of December.
Analysts from Bmo Capital Markets, on the other hand, expect the S&P to end this year at 5,300 points, 12% above the current level. Morgan Stanley strategists, on the other hand, forecast the S&P at 4,400, down 6.9%. In short, the experts are far from agreeing on the trend of the stock markets. Technology stocks in particular would lose weight in 2022. Microsoft, Nvidia, Apple, Alphabet, and Tesla accounted for about a third of this year’s S&P earnings.
Tesla traded at around 123 times its annual earnings last week, while Nvidia traded around 58 times above its profits. The profits of large US companies are expected to grow next year, albeit at a slower pace than this year’s supersonic. Factset analysts estimate that the profits of the S&P 500 companies will increase by 9.2% in 2022, compared to the expected + 45% in 2021.
The oil market
In 2021, Brent prices closed at nearly $ 78, up by about 50%. Bank of America experts predict an increase of up to $ 120 in 2022. The International Energy Agency has estimated that the world consumed around 96.2 million barrels a day this year, less than it did before. start of the pandemic and expects global demand to return to pre-coronavirus levels by 2022, i.e. to around 100 million barrels per day in the third quarter of 2022.
Hearings to confirm Powell will begin soon
A very important factor for the markets at the beginning of this year will be the hearings that will begin in the next few days in the Senate to confirm Jerome Powell as head of the Fed. Joe Biden appointed him, reconfirming him in the position, but to ratify this decision it is necessary the go-ahead from the Senate. “Nine out of ten will be confirmed – comments Cesarano – but the official nature in these cases is important. In this phase, Congress will move in the opposite direction to what it did in 2018, during the Trump era.
Back then everyone was asking Powell not to raise rates, while now Democrats are asking him the opposite, because they want the Fed to stop rising inflation ahead of the midterm elections, which will be held in November 2022. The the fear is that inflation causes the Americans to lose purchasing power, who could blame the DEMs for this and not vote them in November “.
In addition to the midterm elections, 2022 will be important for Italy, which will have to choose the new President of the Republic at the beginning of the year. In April it will be the turn of France to vote for the reconfirmation of Macron as head of state and in October the coronation of Xi Jinping will be held in China.
.