What’s in Store for the Stock Market in 2022?

There’s obviously no crystal ball when it comes to investing. But every year at this time analysts and economists put out their predictions on how the stock market will perform in the coming year.

In so-called “normal” economic periods, it might be easier to suggest how the TSX and S&P 500 will perform. But when you’re facing a global pandemic, soaring inflation, uncertainty, and volatility, the crystal ball gets a little murkier.

This might explain why there is little consensus on how the broader stock market will perform in 2022. If there is one thing analysts can agree on, it’s that investors should continue to stick with stocks.

Will the S&P 500 and TSX Go Higher or Lower in 2022?

In 2020, the S&P 500 rallied approximately 16%. With one month left in 2021, the S&P is up 25% year-to-date, fuelled by a recovering economy which has juiced corporate earnings. Since the start of 2020, the S&P 500 has soared 45%.

The TSX meanwhile inched up roughly two percent in 2020 and has climbed 23% in 2021. Since the start of 2020, the TSX has advanced 27%.

If a global pandemic and one of the sharpest economic contractions can’t derail the stock market, what could? Not much it seems. Since 1960, the S&P 500 has only ended in the red four times.

So where will today’s bullish stocks be at the end of 2022? It depends on who you ask. In a research report, Goldman Sachs said it expects the S&P 500 to rise nine percent to 5100 at year-end 2022.

The S&P is currently hovering near 4,700. The investment bank said it believes the record-rally will face headwinds from slower economic growth and the likelihood that the Federal Reserve will begin raising rates in July.

Morgan Stanley is a little more bearish and predicts the S&P 500 will finish 2022 at 4,400, which points to six percent downside. They say U.S. stocks have higher valuations and profitability relative to pre-pandemic levels and will face headwinds from the largest expected rise in inflation-adjusted interest rates. Interestingly, instead of looking at U.S. stock, the bank says it likes equities in Japan and Europe and the Canadian dollar instead of the Swiss Franc.

What about the TSX? The TSX is up 25% year-to-date, and that rally is expected to continue in 2022, but at a slower pace. Strategists at BMO Capital Markets are predicting the TSX benchmark index will hit a new record of 24,000 by year-end 2022. That still represents a double-digit gain over 2021.

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North American stocks have been on a blistering run since bottoming in March 2020, with the S&P 500 and TSX both at record levels. Most strategist expect that momentum to continue in 2022, but at a slower pace. Nothing is ever guaranteed of course. The markets continue to face serious headwinds. And then there is the unknown. The markets will certainly face unexpected surprises in 2022. For those wondering where to park their investing dollar in 2022, the trading professionals at Learn-To-Trade.com can show you how to trade more confidently and profit more consistently, no matter what direction the stock market is heading.

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