2022 stock market outlook for inflation, Wall Street recommendations

  • As we head into 2022, Wall Street firms agree that inflation will come back from its current levels.
  • Some say the higher inflation will persist and others say it will return to historical norms.
  • Insider has summarized the inflation projections for 2022 from strategists of the top Wall Street companies.

2021 was a record year for the global economy in many ways.

The stock market recovered continuously historical highs. An unprecedented one 2,388 companies Raised $ 453.3 billion in IPOs this year, up 64% and 67% year over year. according to Ernst & Young. And the total market value of cryptocurrencies rose from $ 800 billion at the beginning of the year to $ 2.3 trillion.

But perhaps the most intensely studied economic indicator this year has been inflation, which skyrocketed to its highest level in nearly 40 years. The Bureau of Labor Statistics reported that the consumer price index (CPI) – a commonly used measure of US inflation – has risen 6.8% year on year in November, a number unknown since June 1982. The price index of personal consumption expenditure (PCE), often touted as a more accurate indicator than the CPI for measuring consumer behavior, peaked at 5.7% in November – also the highest year-on-year increase since 1982.

“In 2021, the rate of inflation has increased every month,” said Charlie Billello, CEO of Compound Capital Advisors, in his December 27th newsletter.

A trend that the average US household also shares increasing consumer demand forcing retailers to pass higher manufacturing costs on to customers through price increases. From Oreos to Sour Patch Kids to real estate, everything is getting more expensive these days.

It is therefore not surprising that inflation is at the fore for both private and institutional investors through 2022 31% of the respondents in a recent Bloomberg poll highlighting inflation as one of the biggest risks to markets over the next year.

Where is Wall Street?

“While the supply chain and associated inflation headwinds could last into the first half of 2022, we expect both to wear off after mid-year,” the Wells Fargo Investment Institute said in its 2022 Outlook report. “We expect inflation to weaken from current levels in 2022 but stay above recent historical norms.”

Other firms like Goldman Sachs and Morgan Stanley seem unanimously to share this view as they head into the new year. Most investment banks expect inflation to fall from its current staggering highs as supply chain bottlenecks ease, but they predict that it will still remain elevated compared to pre-pandemic levels.

However, banks disagree on the lingering impact of inflationary pressures in 2021 – while some believe higher inflation will persist in the years to come, others believe it will return to historical norms much more quickly.

Below is a round-up of inflation projections for 2022 from nine leading Wall Street companies, plus comments and investment recommendations for navigating the stock market from each bank.

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