S&P 500 to reach 5050 on continued robust earnings growth, says J.P. Morgan

As pandemic volatility continues to fade, J.P. Morgan Global Research forecasts are upbeat, with expectations of further equity market upside and above-potential growth.

S&P 500, global GDP, equity market, inflation, economic forecasts
After two years of uncertainty and lockdowns that resulted in the largest drop in global GDP history, the 2022 outlook is looking brighter.

S&P 500, the top-most single indicator of large-cap US stocks representing nearly 500 leading corporates across 11 sectors, generated a return of about 27 per cent in 2021. J.P. Morgan Global Research is of the view that there is more upside for stocks in 2022 and economic growth is set to rebound in this year.

As per the earlier target, the J.P. Morgan Research price target of 4,700 was acieved on the back of rapid earnings growth driven by rising mobility and generous monetary and fiscal policy.

The S&P 500 is down by nearly 6 per cent YTD and is currently at around 4482 levels with the 52-week range of 3,694.12 – 4,818.62 while as per the December 2021 report, J.P. Morgan is of the view that S&P 500 will reach 5050 on continued robust earnings growth in 2022.

“In 2022, we expect S&P 500 to reach 5050 on continued robust earnings growth as labor market recovery continues, consumers remain flush with cash, supply chain issues ease, and inventory cycle accelerates off historic lows. Most of the equity upside should be realized between now and the first half of 2022. More so, equities have already priced in a more aggressive Fed, while high beta stocks (both high beta growth and value) have significantly de-rated, lowering the bar for equities to outperform” said Dubravko Lakos-Bujas, Chief U.S. Equity Strategist at J.P. Morgan Research in a report titled ‘Key economic and market forecasts for 2022’.

After two years of uncertainty and lockdowns that resulted in the largest drop in global GDP history, the 2022 outlook is looking brighter. As pandemic volatility continues to fade, J.P. Morgan Global Research forecasts are upbeat, with expectations of further equity market upside and above-potential growth.

According to the report, earnings growth also looks better than expected, supply shocks are easing, the China and Emerging Market (EM) backdrop is set to improve and consumer spending habits should continue to normalize.

Looking to 2022, J.P. Morgan Research expects to see market upside, though more moderate, on better-than-expected earnings growth with supply shocks easing, China and emerging market backdrop improving and normalizing consumer spending habits.

While inflation will remain a recurring theme, there is a compelling case to be made for inflation rotation rather than broad-based acceleration in prices. Record corporate liquidity and strong fundamentals should continue to drive capital investment, inventory re-stocking, shareholder return and merger and acquisition (M&A) activity.

With this in mind, the key risk to this outlook, according to the report, is a hawkish shift in central bank policy – especially if post-pandemic dislocations persist, such as further delay in China reopening or continued supply chain issues.

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