Stock Market Predictions for 2022

The S&P 500 closed last Thursday (12/23) @ 4725.  The average 2022 stock market prediction among several of the financial firms is 4985, a 5.5% gain from last Thursday.  The predictions range from a low of 4400 to a high of 5330.  The low suggests a (6.9%) loss.  The high suggests a 12.8% gain from last Friday.

Why the modest 5.5% average gain prediction? 

Many of the firms are adhering to the old adage, “Don’t Fight the Fed,” however in reverse.  The “don’t fight the fed” phrase has referred to not doubting the stock market, when the Fed is throwing massive liquidity into the economy.

Now, we’re apparently starting to reverse course.  Don’t fight the Fed, as liquidity injections are now going to zero, by roughly the end of the 1st quarter in 2022.  This explains the modest average prediction for 2022.  History suggests that in the initial phase of Fed tightening, the stock market does ok, however returns tend to be more modest.  Without the Fed aggressively buying treasury and mortgage bonds, logic suggests that rates should modestly increase.  Mortgages, car loans, and corporate borrowing costs should rise, which historically slows demand.

So here we are, the last week of a Covid-stressed 2021.  Omicron new cases have significantly increased and we should expect a bit more as the reports come in later this week.  Thank goodness the severity has been much less, so far.

Predictions make interesting reading, however most prove to be incorrect!

How should you position your money for 2022?  If your investment objective and time horizon have not changed, and your portfolio is positioned specifically for your situation, your portfolio should already be properly diversified and positioned.  I do recommend reviewing your fixed income allocation, as many Bond market index funds and other bond funds have been in negative territory for most of 2021, and could see a repeat in 2022.  Be careful not to stretch for yield however, as this can make a bond sometimes behave like a stock if things get dicey.

For non-clients who have questions regarding your portfolio positioning or questions how events may impact your portfolio in 2022, please feel free to schedule a complimentary consultation.

For clients, this is an automatic part of our investment process, however you are also invited to call prior to your next scheduled review, if desired.

Markets Last Week

For the holiday shortened week, the Dow Jones Industrial Average rose 1.65%, the S&P 500 3.2%, the Nasdaq Composite 3.20% and the Russell 2000 3.12%

Over the pond, foreign stocks rose 1.64% with emerging market stocks up .40%.

The 10-year US Treasury yield closed @ 1.49%.  Any predictions where the 10-year will finish in 2022?  I’d love to hear your thoughts!

Happy New Year!!

We wish you a very Happy, Safe, Healthy and Prosperous New Year. 

Ellen and I are very thankful to have the honor serving many wonderful clients. 

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Paul Levin CFP®, ChFC®, RICP®

Retirement Income Certified Professional®