As we start a new year, many anticipate another strong run for U.S. equities and stock exchange traded funds in 2022.
After the benchmark S&P 500 index rose about 27% in 2021, many market analysts forecast the momentum to continue for 2022.
Supporting this positive outlook, corporate America is expected to maintain its strong earnings growth, albeit at a slower rate when compared to last year’s recovery off the coronavirus pandemic lows, Reuters reports.
“While earnings for the overall index remain durable, there will be greater dispersion of winners and losers and growth rates will slow materially… 2022 will be more about stocks than sectors or styles, in our view,” according to Morgan Stanley.
Citigroup analysts on Wednesday upgraded their S&P 500 price target for the end of 2022 to above the 5,000 level for the first time as the brokerage expects strong corporate earnings to continue this year, Reuters reports.
“Earnings-related target setting inputs justify the new target. Thus, we remain moderately constructive on the broader market outlook, while acknowledging valuation headwinds as the Fed moves down a more hawkish path,” Citigroup said.
Ongoing concerns like elevated inflationary pressures and persistent supply constraints due to the coronavirus pandemic will also continue to impede an efficient global flow.
“Persistent supply shortages and inflation pressures lead us to adjust the magnitudes of some 2022 targets, but we believe the global economy should still mark an above-average pace next year. More importantly, our tactical preferences for the next 6 to 18 months are nearly all unchanged,” Wells Fargo said.
While the positive overall outlook remains, investors should anticipate slower or more steady growth in this maturing economic cycle.
“Decelerating economic growth, a tightening Fed, and rising real yields suggest investors should expect modestly below-average returns next year,” according to Goldman Sachs.
Investors who are interested in gaining broad market exposure through the S&P 500 have a number of options to choose for, including the SPDR S&P 500 ETF (NYSEARCA: SPY), the iShares Core S&P 500 ETF (NYSEARCA: IVV), and the Vanguard 500 Index (NYSEARCA: VOO).
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