“We expect the Fed to raise rates but see its cumulative response to inflation as more muted than ever before,” said analysts from BlackRock in a 2022 market preview report Monday.
That echoes the overall view among experts that there’s no need to be too nervous about these various risks. According to data from Refinitiv, consensus forecasts on Wall Street predict S&P 500 profits will increase about 11% in 2022.
Setbacks to President Joe Biden’s “Build Back Better” social spending bill, which passed in the House but has stalled in the Senate, may not dampen growth either.
“Conventional market wisdom is naturally focused on the resurgence of Omicron, the potential demise of ‘Build Back Better’ and exactly how many times the Fed will be hiking rates. But these are risks to a much more likely central scenario that looks pretty good,” Christopher Smart, chief global strategist and head of the Barings Investment Institute, said in a report Monday.
Smart noted that the Fed is unlikely to raise rates too aggressively, which means that the US economy could hum along at an annualized growth rate near 4% this year.
He also predicts that companies will produce “ample profits that they reinvest in their own growth and vaccines that continue to help tame new variants of the coronavirus.”
Smart added that “supply chains should normalize over the course of the year, emerging markets demand should finally benefit from global recovery and even China should restore order to its property and tech sectors.”
In other words, nearly all of the major 2021 market and economic worries may dissipate.
Yet stocks have already been rallying through the end of last year in anticipation of smoother sailing this year. That’s why some are predicting more muted gains for stocks in the year ahead.
“2022 is likely to bring us back to boring — but boring doesn’t mean smooth sailing,” Robert Teeter, managing director of Silvercrest Asset Management, said in a report Monday. “Investors should expect a choppy 2022, with stocks advancing around 7%, primarily driven by earnings gains.”