A trader wears “2022” glasses while working on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, December 31, 2021.
Michael Nagle | Bloomberg | beautiful pictures
Inflation, tightening central bank policy and Covid-19 infection rate continue to threaten There is a bullish bias for the stock, but analysts largely do not foresee a serious correction in 2022.
Last week saw US stocks have their second worst start in a year since Lehman Brothers collapse, fueled by further hawkishness from the Federal Reserve and a sell-off in appreciated US tech stocks. The trend continued on Monday, as global stocks fell again in the red.
A major source of the hawkish surprise expressed in the minutes of the Federal Open Market Committee’s latest meeting was policymakers’ desire to tighten balance sheets, the importance of which Deutsche Bank analysts say has been undervalued by the market in the past.
The rapid spread of the Covid-19 omicron variant around the world has also been a persistent cloud for the equity outlook in recent months, with record daily barrels and… Social restrictions are tighter in many major economies.
Luca Paolini, chief strategist at Pictet Asset Management, said: “The Omicron Covid variant may have led to more constraints but the economic recovery remains resilient, which means equities do not look easy hurt by the correction,” Luca Paolini, chief strategist at Pictet Asset Management, said Monday.
Paolini said the global economic recovery remains supported by a strong labor market, surging demand for services and a healthy corporate balance sheet. As a result, Pictet is looking for opportunities to increase its share weight in 2022.
However, he concedes that despite expectations of strong GDP growth, particularly in the US and Europe, rising inflation poses some downside risks – and will likely peak in the first half of 2022 along with inflation. with the Fed raising interest rates in June.
While Pictet has a positive view on equities, Paolini’s team has taken a tactically neutral view of the overall asset class as liquidity conditions in the US turn negative and Stocks continue to appreciate.
James Solloway, chief market strategist at SEI’s Investment Management Unit, struck a similar tone last week, noting that GDP growth will decelerate, the labor market will tighten, inflation will As inflation peaks and Covid continues to have a negative impact in the short term, the global economy should continue to manage through periodic setbacks.
“While there has been speculative behavior in some areas of the financial world – for example, meme stocks, SPACs, crypto and NFTs – we do not see the kind of speculative enthusiasm that can lead to a serious equity adjustment in 2022,” said Solloway.
While data to date have shown that the highly transmissable omicron variant may not be as severe as previous repeats of the virus, Mazars Chief Economist George Lagarias said on Tuesday. Five that markets should avoid complacency about the possibility of other shocks related to the pandemic.
“We can’t allow ourselves to fall into the trap of trying to predict the timeline for a game that ends with the next turn undetermined,” Lagarias said. Currently, the risk is non-linear, but rather parabola”.
“All it takes is a new vaccine-resistant dominant variant to undo the global vaccination months and make bad predictions.”
US Valuation Gap
Lagarias also emphasized that US stocks, in particular, are expensive and concentrated – a feature highlighted last week by the weakness of the tech giants – but noted that investors have a lot to offer right now. few alternatives to stocks in general.
He suggested that an adjustment in risky asset prices is increasingly possible due to a paradigm shift from central banks towards quantitative easing, while inflation here repeatedly poses a forward situation. dilemma.
“All of those uncertainties are bad for the business, but how the risky asset will perform remains unclear, as the drivers are completely decoupled from it all,” Lagarias said. all of the above,” Lagarias said.
“It could be the ‘liquidity remaining’ and ‘no alternative to stocks’ argument that prevailed, or it could be that the market went into ‘fear mode’ and secular volatility increased. go up.”
Kristina Hooper, global market strategist at Invesco, included the possibility of a correction in the US stock market in her top 10 predictions for 2022.
“There is a possibility that the US stock market will correct in the first half of 2022, but I would expect a relatively quick recovery,” Hooper said.
“It’s been so long since we’ve had such a significant correction that one’s odds have gone up – and the increase in the odds is the fact that the Federal Reserve is starting to normalize its main monetary policy in the first half of 2022 and could start to raise interest rates.”
