In the latest LPL Market Signals podcast, Ryan Detrick and Jeff Buchbinder break out a crystal ball and take a look at what stocks might do in 2022. They also examine some of the recent market volatility and economic data.
The bull market continues
Jeff points out that we continue to see a favorable economic environment for stocks in 2022, consistent with mid-cycle expansion years and continued healthy earnings growth. Ryan explains that stocks tend to do quite well after six quarter win streaks—exactly what was just completed. Ryan and Jeff agree that double-digit returns for the S&P 500 Index next year are quite possible. Of course, it won’t be easy—worries about the Delta variant continue, there are supply chain disruptions, inflation, and higher interest rates all could make it a bumpy ride.
The first 5% pullback
It took nearly a year, but stocks officially had their first 5% pullback since October 2020. Ryan notes that this hasn’t been comfortable, but it is actually quite normal. In fact, the average year pulls back 14.2%, with many of those years still finishing in the green. After more than a 100% rally off the March 2020 lows, Ryan and Jeff think that this is a well-deserved pullback—and an opportunity—LPL Research still likes cyclical value and small caps over the coming months and quarters.
Logjams are still everywhere
Ryan and Jeff conclude by discussing the continued supply chain issues. With nearly 100 ships now just sitting at the port of Los Angeles and Long Beach, supply chain issues have broken a new record. And with the holiday season coming fast, these issues likely aren’t going anywhere. Jeff notes that the core personal consumption expenditures (PCE) are the Federal Reserve Bank’s favorite inflation measure and it is at 30 year highs. But Ryan and Jeff still believe inflation is more transitory and will come back down once supply chain issues work themselves out—however—this is taking longer than most expected. Jeff observes that recent manufacturing data on the surface appeared to be strong, but much of that was due to order backlogs and supplier delivery times. The economy is improving, but the bottom line is—it is having some growing pains.
Tune in now
Listen to the entire podcast to get the LPL strategists’ views and insights on current market trends in the US and global economies. To listen to previous podcasts go to Market Signals podcast. You can subscribe to Market Signals on iTunes, Google Podcasts, or Spotify and find us on the LPL Research YouTube channel.
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All index data is from FactSet.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This Research material was prepared by LPL Financial, LLC.
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