To The Moon

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Bullish or Cautious? 10 Wall Street strategists' 2022 Outlook tell you! (PART 1)

Globally

• We predict that 2022 will deliver another year of impressive growth, with the global economy growing by 4.5%.
• We see a high probability of rate volatility, with the curve steepening in the next few months before potentially flattening as the market starts pricing in more hikes later in 2022.

FED & Inflation

• We still believe that inflation will decelerate next year.
• US inflationary pressure may be higher and for longer than previously projected, with supply-side problems taking longer to resolve.

Stocks & Sectors

• With rate hikes already largely priced in, medium-term bonds seem to offer the most value
• Factoring in some multiple contraction, to account for the risk of a growth slow down and /or an inflation shock, would justify mid-to-high single-digit total returns for global equities in 2022.

Globally

• The economy and markets are shifting from early cycle snapback to a phase of more moderate growth. For portfolios, this means a rather different set of potential opportunities and risks.
• We expect a total return for global equity of 7% to 9%, and -1% to 0% for global fixed income

FED & Inflation

• Commodity prices and other basic inputs will not rise sharply in price forever. This is the case even as the Federal Reserve leans into job growth at the expense of short-term inflation.
• Given the Fed’s preferred inflation measure and the Consumer Price Index differ, we’d assume the coming ten-year inflation rate is about 0.5% higher on average than in the ten years prior to the Covid shock.

Stocks & Sectors

• Financials were not impacted in 2020 as they were in the Global Financial Crisis, which bodes well for them and the wider economy.
• Industries should benefit from capital-for-labor substitution, along with parts of the technology sector, to address strong demand coupled with tight labor markets.

Globally

• We see 2022 heralding a new regime by delivering global stock gains and bond losses for a second year – what would be a first since data started in 1977.

FED& Inflation

• We expect inflation to be persistent and settle above pre-Covid levels, central banks to be more tolerant of higher inflation
• The FED is expected to kick off rate hikes in 2022，Central banks will be withdrawing some monetary support as the restart does not need stimulus.

Stocks & Sectors

• The outlook for stocks in 2022 will be more challenging, equities to provide high single-digit returns over the next 12 months.
• We prefer equities, We favor DM stocks over as we dial down risk slightly amid rising risks to our base case.
• Favoring certain sectors such as finance or energy based on their low valuations and alignment with the economic resurgence.

Globally

• The outlook for inflation, interest rates, earnings, and valuations, says that the next few years remain a reasonable time to be invested in shares,
• A less good time to be in bonds, and the right moment to protect your portfolio with some diversifiers like gold and other commodities.

FED & Inflation

• The FED is now looking to step back and end—or "taper" in Fed-speaking
• Its bond purchases in anticipation of rising interest rates back to what it considers a neutral policy (2.5%).

Stocks & Sectors

• Suggested fair value at the end of 2021 would be just under 4,500. The same model points to 4,900 at the same time in 2022.
• Stocks are poised to deliver positive returns in 2022, but likely not as much as they did in 2021
• Earnings growth in 2021 was 45%. In 2022, earnings are expected to grow at a slower pace with consensus estimates at 8%.
• Growth stocks and value stocks took turns outperforming that could continue in 2022.

Globally

• A high tide of growth, aided by a sea change in fiscal policy, is likely to help float the global economy safely over the rocks of risks in 2022
• In 2022, global GDP is anticipated to grow around 5%, forming the strongest back-to-back years for the world economy since the early 1970s.

FED & Inflation

• Inflation pressures are likely to ease over the course of the year; some of 2021’s shortages may turn into gluts by the second half of 2022.
• The Federal Reserve has signaled that it will taper its bond purchases, but it’s still unclear when it will pivot to rate hikes.

Stocks & Sectors

• Although monetary policy may begin to tighten, the slow pace of withdrawal from pandemic-era policies may limit any negative impact on stock valuations.
• Historically, when global growth is above average, international stocks have tended to perform well, even when that growth rate is slowing, due to a high weighting in economically sensitive sectors.