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Stock market 2022: Wall Street strikes a cautious tone – yahoo.com – 154news.com

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Strategists have begun to deliver their outlooks for the stock market next year – and many are tempering expectations after this year’s double-digit gains. 

Against a backdrop of vaccinations, easing lockdown measures and a broad-based economic reopening, the S&P 500 (^GSPC) rose by 21.6% in 2021 through market close on Nov. 30. The blue-chip index has also more than doubled from its March 23, 2020 nadir.

The S&P 500 is unlikely to repeat these kinds of returns next year, based on the projections of a number of pundits. With market participants pricing in at least one interest rate hike from the Federal Reserve, and an initial boost from the reopening, and monetary and fiscal stimulus fading, the easy gains for this cycle are likely in the past. And at least one strategist thinks stocks are set to decline at least modestly next year from current levels.

Here’s what some strategists from top Wall Street firms are predicting for the stock market next year. 

DWS Group (Target: 5,000): ‘When it comes to PE multiples, they stand on the shoulders of the bond market’

DWS Group expects the S&P 500 will rise further into next year, supported by a combination of sustained — if slowing, earnings and economic growth — and a contained rise in rates. 

“Our view for risk assets is simply, it should be another good year in 2022,” David Bianco, DWS Group chief investment officer, Americas, said during a media call on Dec. 1. “With lower inflation, slowing inflation, we should be comfortable with the idea that interest rates, both nominal and real, only climb modestly.”

The firm expects to see the S&P 500 end 2022 at 5,000, growing 9.5% from closing levels on Nov. 30. 

“So far, long-term interest rates have only climbed slightly, and long-term real interest rates which are key for the PE [price-earnings ratio] of U.S. equities and equities worldwide, they’re still near all-time lows,” he added. “When it comes to PE multiples, they stand on the shoulders of the bond market.”

Bianco expects the S&P 500’s PE multiple, which has been trading at about 22 times current earnings, will be sustained through next year. The firm also anticipates S&P 500 companies’ aggregate earnings per share (EPS) will come in at about $228 for 2022, growing by 7% from an estimated $213 level this year. This earnings view assumes no corporate tax hikes in the U.S. in 2022. 

“Our view is that the equity market, the S&P, is largely fairly valued, but our preferences for a long time have remained the digital businesses — technology, communications, growth stocks in general, a preference for intangible businesses — we’ve argued that these types of businesses actually do provide terrific inflation protection,” Bianco said. “This is not the 1970s, and often, we think the best way to protect …….

Source: https://finance.yahoo.com/news/stock-market-equity-outlook-2022-193659328.html