LPL Market Signals: Outlook 2022 and Omicron

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Wednesday, December 8, 2021

LPL Research is extremely excited about the release of Outlook 2022: Passing the Baton. You can see the interactive version of our Outlook here.

In conjunction with the release of the Outlook, this week in the LPL Market Signals podcast, Jeff Buchbinder and Ryan Detrick discussed the latest on the Omicron variant and what an earlier tapering could mean, while also breaking down where LPL Research sees the economy, stocks, and bonds going in 2022.

About Last Week

It was super volatile for stocks last week, as Fed Chair Jerome Powell hinted at an earlier tapering, while Omicron uncertainty is high. Jeff says that Omicron matters, but the likely increase in tapering could have been what really was behind the volatility. Ryan notes that the new variant is extremely transmissible, but doesn’t appear to be nearly as deadly as previous variants. Jeff ends things by saying that tapering could be a good thing, as it means the training wheels are coming off and a more normal world could be occurring.

What About 2022?

Ryan and Jeff now break down our views on 2022. Below are the highlights of the conversation. Please be sure to read the whole Outlook here: LPL Research Outlook 2022 | Passing the Baton

Economy: As the U.S. economy moves more to mid-cycle, LPL strategists forecast 4.0 to 4.5 percent gross domestic product (GDP) growth in 2022. Fiscal and monetary policies played big roles in the economic recovery in 2021, but LPL’s strategists see 2022 playing out as a handoff—with consumers, productivity, small businesses, and capital investments all playing a part in the next stage of economic growth.

Stocks: Expect solid economic and earnings growth in 2022 to help U.S. stocks deliver additional gains next year. LPL strategists believe the S&P 500 could be fairly valued at 5,000 to 5,100 at the end of 2022. Additionally, they favor U.S. over developed international, value over growth, and cyclical sectors over defensives.

Bonds: Expect interest rates to move modestly higher in 2022 based on near-term inflation expectations above historical trends and improving growth expectations once the impact of the COVID-19 Delta and Omicron variants recede. LPL Research’s 2022 forecast for the 10-year Treasury yield is 1.75 to 2.00 percent.

You can watch the full podcast below, or directly from our YouTube channel.

 

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

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All index and market data from FactSet and MarketWatch.

This Research material was prepared by LPL Financial, LLC.

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