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By Mike Dolan
LONDON (Reuters) – You have to read the lower case letter again to remind yourself that stocks can fall again.
The often-used compliance note, which states that the value of your investments can go down and up, seems to be appreciated by stock investors today.
And after a three-year winning streak, fund managers are clearly betting on another.
Bank of America (NYSE:) The 2021 monthly pre-fund fund survey shows the largest eight-year overweight shares in the U.S. – 8% of 388 respondents manage more than $ 1 trillion in assets, saying there are too few shares. generally.
And a weekly JPMorgan (NYSE 🙂 customer survey had a 60% plan to add even more stock exposure in the coming days and weeks.
As far as investment and bank forecasts for 2022 are concerned, the basic arguments for continuing with stocks are quite simple.
If a global pandemic and the hardest economic downturn of a generation hadn’t sparked a negative year for expensive stock indices – many are wondering what will happen next.
Keep the liquidity flowing in the wave until it finally seems to be a consensus that it is still in the drain.
Central banks may already be cutting emergency aid, turning inflation around, but the last place you want to be is in bonds, if you don’t think we’ll be back on the decline in 12 months.
Few do.
It’s also hard to say that stocks don’t often drop throughout the calendar year, however. Only one in four years since 1960 has ended in red.
To achieve a more diversified spread of stock risk, such as the MSCI stock index for all countries, 20 years ago was the best three-year period from the dot.com bubble and only 4 years since then. The index has doubled since the deep but brief March 2020 pandemic.
Leaving aside the famous rise at the end of the millennium, the three-year period has not been better for the 34-year history of this global index.
With these measures, given the complete consensus and the apparent lack of an alternative, you tend to sit back and notice when one of the toughest houses on Wall St predicts a fall in shares in 2022.
Just this week Morgan Stanley (NYSE 🙂 – Wall St one of the most vocal and accurate forecasters of the V-shaped market recovery after last year’s pandemic – said it sees the S&P500 about 6% below current levels by the end of next year.
That’s hardly a sign of running up the hill – but any negative signal from the stock market forecast is noticeable today and only the collapse of the 2008 bank created a more negative year for the S & P500 since the crash of dot.com. 34 years of the MSCI country index, https://fingfx.thomsonreuters.com/gfx/mkt/egpbkaqdovq/msciac.PNG 2021, https://fingfx.thomsonreuters.com/gfx/mkt/klpykdbwqp./g PNG
Removal of stabilizers
Morgan Stanley’s reasoning was far from alarmist, he wanted to emphasize the “normalization” of growth and asset prices.
He spoke of the “training wheels” coming from COVID’s subsequent recovery in the coming year, as policy supports are gradually being phased out and financial assets need to be balanced on their own for change.
“Markets have a lot of ‘normal’ mid-cycle problems: better growth colliding with higher inflation, changing policy, and more expensive valuations.”
Keeping in the context of nerves about tighter credit and financial conditions, the 10-year Treasury yields see 2022 return to 2.10% from the current 1.6% – essentially back to where it was in mid-2019.
However, these relatively innocuous predictions are also weak.
Goldman Sachs (NYSE 🙂 expects another 9% on the S&P500 by next year, JPMorgan expects the index to add another 6% at least by mid-next year and UBS expects a 6% higher by the end of 2022.
Of course, some of this is about time: when the wind changes when mixed with politics with macro-variables that are still largely unknown, even about inflation and even about the pandemic itself.
Olivier Marciot, portfolio manager at Unigestion, said he is cautious about next year, but maintains exposure to risk assets while developing central bank policy.
“History has shown that trying to predict a real change in financial conditions usually yields disappointing results in a return to comfort.”
What’s more, the forecasts already on the table are a testament to the fact that we are in November. And a lot of things can happen in liquid markets at the end of the year, when investors may be itching for bank profits.
Already the dollar is growing significantly mixed with inflation and interest rate concerns, but also with mixed geopolitics between Western allies and Russia and China – from the Belarusian border to Ukraine and Taiwan as well as in space. And the rise of the dollar is effectively tightening world financial conditions on its own.
The end of the year could be even more nervous than usual in the military and elsewhere in Europe and elsewhere.
Come on New Year’s Eve, maybe Morgan Stanley’s 2022 call-up will also start to look up. Bank of America Funds Exposure Survey, https://fingfx.thomsonreuters.com/gfx/mkt/dwvkrelwjpm/BofA.PNG
(Mike Dolan, Twitter (NYSE :): @reutersMikeD; Alexander Smith Edition)
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