Sep 10, 2021 - Economy

Wall Street's sneak preview of 2022

Illustration of a weather forecast, stylized as rain made of money.

Illustration: Aïda Amer/Axios

Wall Street’s top stock market forecasters are already telling clients what to expect in the stock market in 2022.

Why it matters: The stock market, as measured by the S&P 500, is up an impressive 20% since the beginning of the year. It’s more than doubled from its March 2020 low.

  • Such gains will surely have investors wondering if the market has gotten ahead of itself.

What they’re saying: Savita Subramanian, Bank of America’s head of U.S. equity strategy, expects the S&P 500 to climb to just 4,600 by the end of 2022. This implies a modest 2% gain from Thursday’s closing price of 4,493.

  • Subramanian, one of Wall Street’s more cautious forecasters, warns that “Investor sentiment and valuations are extended — a lot of optimism is already priced in.”
  • In her research note published on Wednesday, she warned that the S&P is poised to average negative annual returns over the next decade.
  • Wells Fargo head of equity strategy Chris Harvey is also cautious, expecting the S&P to end 2022 at just 4,715. But, not before climbing to 4,825 by the end of 2021 first.

Yes, but: Some forecasters are considerably more bullish, like Credit Suisse’s chief U.S. equity strategist, Jonathan Golub. He sees the S&P 500 hitting 5,000 by year-end 2022.

  • “We see upside to estimates as empty shelves are restocked and pricing power is maintained,” Golub said in an Aug. 9 note to clients. “Consumer spending should improve as the unemployment rate drops further, accompanied by higher wages.”
  • Goldman Sachs chief U.S. equity strategist David Kostin sees the S&P rallying to 4,900 in 2022. “We expect earnings growth will be the primary driver of US equity returns,” he said.
  • On Tuesday, UBS head of U.S. equity strategy Keith Parker forecast that the SP 500 would rise to 4,850 in 2022, but cautioned that the market is “likely to sell off at some point in coming weeks as investors brace for higher yields, taxes, slowing data, etc.”

The bottom line: The wide range of forecasts is a reminder of how difficult it is to predict short-term returns in the stock market with much certainty. Indeed, it’s not unusual for these experts to make multiple revisions along the way.

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