SlateStone Wealth chief market strategist discusses the impact of inflation on the stock market on ‘Making Money.’
Equities are on quite a run in 2021 with the S&P 500, the broadest measure of U.S. stocks, sitting at a fresh record high and many strategists see the momentum continuing in the new year but not without some bumps.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| SP500 | S&P 500 | 4725.79 | +29.23 | +0.62% |
“I think we need to get through one or two earnings periods to prove both businesses and consumers alike are as adaptable as they were during this first wave of the COVID virus. I think we could gradually grind higher, maybe if we are lucky, get to 5,100 next year,” UBS Managing Director and senior portfolio manager Jason Katz told FOX Business.
MIXED MESSAGES OF THE MARKET: JASON KATZ OF UBS
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| SPY | SPDR S&P 500 ETF | 470.60 | +2.91 | +0.62% |
| IVV | ISHARES TRUST CORE S&P 500 ETF | 472.63 | +2.88 | +0.61% |
| VOO | VANGUARD INDEX FUNDS S&P 500 ETF SHS | 432.64 | +2.65 | +0.62% |
Like Katz, teams at BNP Paribas see the S&P 500 hitting 5,100, while Wells Fargo Institute’s target is as high as 5,300 which would be an increase of 7.9% to 12% from current levels.
“We expect consumer-led strength in the U.S. to serve as the global-growth locomotive through the first half of 2022” wrote the team at the Wells Fargo Institute.
The S&P has advanced 26% this year as of Christmas Week’s closing price.
S&P 500 YTD +26%
WHERE INFLATION IS HITTING CONSUMERS THE HARDEST
But all agree, the gains may not come as easily as 2021 with persistent inflation, the omicron variant, a Federal Reserve in tightening mode and the supply chain crisis.
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“We do not anticipate valuations or Fed liftoff derailing the equity market rally. However, if we do see a worsening in the supply chain picture, this could create an environment in which Fed liftoff and valuations become more problematic” wrote BNP’s Greg Boutle, Head of US Equity Derivatives Strategy and Maxwell Grinacoff, Equity Derivatives Strategist.
JEROME POWELL FACES TURBULENT 2022 AS FED WALKS ECONOMIC TIGHTROPE
As for the Fed, many agree, for now anyway, policymakers are unlikely to rock the boat and will stay their announced course of three planned rate hikes for 2022 as tapering winds down.
“Despite the Federal Reserve tapering its bond buying program in 2022, we expect overall monetary policy to support equity prices. Fiscal policy should be less of a tailwind, and midterm elections may pose market sentiment concerns” wrote the team at the Wells Fargo Institute.
COVID-19 PILL: WHAT TO KNOW
While omicron variant remains a wildcard, the fight against the virus shifted into overdrive in late December with the Food & Drug Administration approving Pfizer and Merck’s COVID-19 pills, a first, while other vaccine makers Moderna stepped up production to meet third booster demand with the possibility of a fourth in 2022.
Moderna Chief Medical Officer Dr. Paul Burton provides an update on transmissibility and booster vaccine protection against the omicron COVID variant.
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| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| PFE | PFIZER INC. | 58.71 | -0.84 | -1.41% |
| MRK | MERCK & CO. INC. | 75.73 | -0.43 | -0.56% |
| MRNA | MODERNA INC. | 249.99 | -1.37 | -0.55% |
“As we then go into next year, we’ll have to see what the data show around the world from all sorts of different centers, academic independence centers. Do we need a fourth dose, a fourth booster? Then when will we need it? How will we want to use an Omicron specific booster? I think those are questions now that we just don’t have the answers to yet” Chief Medical Officer Paul Burton told FOX Business’ Neil Cavuto in late December.
