Next year, says JPMorgan, will see a full global recovery, an end of the pandemic, and a return to normal economic and market conditions.
Those of a similarly Panglossian disposition will heed the investment bank’s not entirely disinterested advice to stock up on equities. Nights will presumably be spent feasting on the fatted calf.
Boosterism flows generously through analysts’ veins. JPMorgan is hardly the only bull in town. UBS takes investors to task for underestimating “the runway for above-trend economic growth”.
Despite Omicron, this is a cheery season. In that spirit, JPMorgan’s scenario is not outlandish. Easy money may be tapering off, but swollen corporate and consumer cash piles should take up some of the slack. Chipmakers have set out big-spending capex plans. Pharma groups are ploughing money into R&D.
The S&P 500, up by more than a quarter this year at 4,697, is expected to churn out more gains. JPMorgan predicts it could hit 5,050. In the UK, where the FTSE 100 is up 12 per cent, wealth platform AJ Bell forecasts a more modest 5 per cent lift to 7,750. Some pundits even predict a reversal of fortunes for Hong Kong, where the benchmark Hang Seng index bled 16 per cent.
In the doghouse are stocks with crazy prices which benefited from lockdowns, such as video conferencing app Zoom Video or exercise bike maker Peloton. Lofty valuations persist among electric vehicle makers.
Lex is more bearish — we journalists have negative cognitive biases where brokers have positive ones, remember. We recall that share price forecasts for the year ahead have historically been 10 per cent too high on average.
There are three wild cards right now. The first is the pandemic, with its capacity to generate scary new coronavirus variants. The second is inflation, and the risk that clumsily executed rate rises will destabilise markets. The third is China, where speculation, consumer spending and interventionism could become toxic.
It would be nice to think markets will live happily ever after as the pandemic attenuates. But investors know better than to take year end predictions from anyone at face value.
The Lex team is interested in hearing more from readers. What is your bet on markets for 2022? Please tell us what you think in the comments section below.