The year 2021 has proved to be super-upbeat with the S&P 500 gaining about 20% so far despite the massive spread of the Delta variant of COVID-19. Solid U.S. economic data points, easy monetary a nd fiscal policies, and vaccine distribution have led to this upsurge. Tech stocks have mainly been responsible for the S&P 500’s monumental achievement. Upbeat earnings have also favored the S&P 500.
Against this backdrop, investors may be interested to know if the S&P 500 has the potential for further rally.
Wall Street’s top stock market strategists have come up with their views on Wall Street for 2022, as quoted on a Yahoo Finance article, originally published on TKer.co.
Most bullish view is offered by the research house BMO, which offers the S&P 500 a target price of 5,300. Wells Fargo Investment Institute sees the key U.S. index in the range of 5,100-5,300. Morgan Stanley’s target price of 4,400 is the most pessimistic. Among 14 research houses, 9 houses’ target price crossed 5,000,
marking a 6% rise from the current level. What’s Behind the Likely Upside?
Along with various research houses, we too believe that
earnings growth should be strong, thanks to consumer spending and capital expenditures. Per the Zacks Earnings Trends issued on Dec 1, 2021, the S&P 500 earnings are expected to be up 8.1% in 2022 over and above of the 45% expected earnings growth in 2021. Revenues are likely to expand 7.1% in 2022 on top of 11.7% likely gains in 2021. Margins are likely to be 0.12% and 3.16% in 2022 and 2021, respectively.
The White House passed the
$1.2 trillion bipartisan infrastructure bill in November. This is likely to boost Wall Street in 2022. The infrastructure bill of $550 billion in addition to the previously approved funds of $450 billion for five years is a tailwind for U.S. economic growth. The 2,702-page legislation is aimed at establishing the United States with the world's best economic infrastructure (read: 4 Sector ETFs to Make the Most of Infrastructure Bill). Household and corporate cash pile will pull off the economy. In September, the Federal Reserve reported that the net worth of U.S. households was $134 trillion in the second quarter — up from $128.4 trillion in the first quarter. That figure stood at $110 trillion in the fourth quarter of 2019, before the pandemic hit. Including nonprofits, accumulated household net worth in the second quarter hit a record $141.7 trillion, as reported on Wall Street Journal. Total cash on hand and in U.S. banks held by U.S. corporations was $268 trillion in Q2 of 2021, up from $262.9 trillion in Q1 and $155.7 trillion in Q4 of 2019. Any Wall of Worry?
Risks include prolonged supply chains issues resulting in inflationary pressure, labor shortages and monetary policy tightening coming more quickly than expected. The Fed has indicated to speed up the QE tapering despite the new Omicron variant of COVID-19 started bothering the world. However, most Wall Street strategists believe that the economy
is better prepared for new waves of Covid infections. Economic & Corporate Gain Slightly Marred by Omicron = Suppressed S&P 500 Gains
After a stellar rise in 2021, the S&P 500 is now boasting a rich valuation. Amid this scenario, Omicron has hit the world. With President Biden not planning a lockdown, and governments and citizens seemingly more aware of handling new COVID infections by now, we do not see a massive threat to global markets. Still, some adverse impact will definitely be there, probably resulting in about a 10% rise in the S&P 500 in 2022 after a 20% jump so far this year.
ETFs to Watch
Against this upbeat backdrop, investors may track S&P 500 ETFs like
Vanguard S&P 500 ETF ( VOO Quick Quote VOO - Free Report) , iShares Core S&P 500 ETF ( IVV Quick Quote IVV - Free Report) and SPDR S&P 500 ETF Trust ( SPY Quick Quote SPY - Free Report) . SPDR Portfolio S&P 500 High Dividend ETF Fund ( SPYD Quick Quote SPYD - Free Report) is a good bet for the dividend plays of the index. SPDR Portfolio S&P 500 Value ETF ( SPYV Quick Quote SPYV - Free Report) and SPDR Portfolio S&P 500 Growth ETF ( SPYG Quick Quote SPYG - Free Report) are the value and growth plays of the index.
Investors can also bet on the leveraged S&P 500 ETFs like
Direxion Daily S&P 500 Bull 3X Shares ( SPXL Quick Quote SPXL - Free Report) , ProShares Ultra S&P500 ( SSO Quick Quote SSO - Free Report) and ProShares UltraPro S&P500 ( UPRO Quick Quote UPRO - Free Report) .