S&P 5,000? Here’s What Analysts and Investors Expect From the Stock Market in 2022

OPINION: This article contains commentary which may reflect the author's opinion

The focus of investors and analysts is already shifting toward 2022 as 2021 draws to a close. After three straight years of at least 16 percent returns for the S&P 500, investors wonder how much more upside the SPDR S&P 500 ETF Trust will deliver in 2022.

Ryan Detrick, Chief Market Strategist at LPL Financial, recently expressed optimism about the S&P 500 hitting the landmark 5,000 level by 2022.

“We believe the S&P 500 could be fairly valued at 5,000–5,100 at the end of 2022, based on an EPS estimate of $235 for 2023 and an index P/E between 21 and 21.5,” Detrick said in LPL’s 2022 outlook report.

According to Detrick, corporate earnings will be the major factor in determining whether the price target range is achieved or exceeded next year. Depending on interest rates staying low for longer than expected, a strong economy and positive investor sentiment may support additional earnings growth and even further expansion of earnings multiples, he said. Detrick said any growth in S&P 500 earnings in 2022 may be difficult to achieve if inflation, wage growth, and rising interest rates pressure margins.

A gain of 6.2 percent is required for the S&P 500 to reach 5,000, a relatively modest gain annually for the index on a historical basis.

Louis Navellier, Navellier’s chief investment officer, says investors can be sure that the market will continue to offer opportunities in 2022, although stock selection will become more important.

“Although year-over-year earnings comparisons will become more difficult in 2022, a narrower market is good news for growth stocks and dividend growth stocks and bad news for the ‘index fund’ crowd, since growth stocks and dividend growth stocks have traditionally prospered in a narrowing, more selective, stock market environment like this,” Navellier said.

In the upcoming midterm elections, the Democratic Party is also likely to lose control of both the House of Representatives and the Senate, and Wall Street historically prefers divided governments.

Investing in the S&P 500 in 2022 is expected to generate modest, positive returns for investors according to DataTrek Research’s annual investor survey. As a result, 81 percent of respondents were expecting a S&P 500 return of 0 to 15 percent for 2022. Another 42 percent of respondents forecast returns of 5 to 10 percent.

“No wonder December is proving difficult, for if an investor thinks next year’s gains will be limited then selling ahead of a so-so year is a solid strategy,” DataTrek co-founder Nicholas Colas said.

Analysts’ single-stock price targets for S&P 500 stocks suggest an average 12-month price target of 5,225, according to Colas.

Stock market performance is hard to predict, but the S&P 500’s long-term performance has been remarkably consistent throughout history. Historically, the annual rolling returns for the S&P 500 have always been between 8 percent and 15 percent for every 35-year rolling period.


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