Survey: Top market strategists see stocks rising nearly 8% in 2022

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Experts foresee the stock market continuing to rise over the next year, according to a Bankrate survey. The Fourth-Quarter Market Mavens survey reveals that analysts expect the S&P 500 to climb about 8 percent over the coming year. It’s the fifth straight quarter that the survey’s respondents predicted a gain in the index, which now sits near all-time highs.

In fact, every analyst who answered the question predicted the market would climb in 2022. In total, these experts expect the index to close out next year at 5,036.75 — compared to the S&P 500’s close of 4,667.45 at the end of the survey period. Most experts also expect stocks to perform the same as or better than their historical averages.

“Despite the unprecedented and uncertain times in which we live, it may provide investors some encouragement that our respondents are fairly upbeat on the outlook not only over the coming year but also over the intermediate and longer terms,” says Mark Hamrick, Bankrate’s senior economic analyst.

Forecasts and analysis:

This article is one in a series discussing the results of Bankrate’s Market Mavens fourth-quarter survey:

Experts: S&P 500 to rise almost 8 percent next year

The last 12 months have seen the S&P 500 continue to climb, making it an attractive time to hold stocks. But what about the future? Survey respondents see the market climbing 8 percent over the next 12 months, just a bit lower than the market’s long-term average of 10 percent.

The results for the fourth quarter were largely in line with analyst estimates from prior surveys. They foresaw 9 percent gains in the third quarter, 8.7 percent in the second quarter and 8.5 percent in the first quarter. Despite a changing roster of respondents, the experts have remained upbeat despite the ongoing pandemic and economic pressures.

In fact, every analyst in Bankrate’s survey expected the market to rise. Estimates of the S&P 500 in the next 12 months ranged from 4,800 to 5,250. This continued optimism comes while the S&P 500 sits near all-time highs after a nearly two-year rally since the March 2020 lows.

Optimism about stocks over the next five years is on the rise

The survey respondents are actually more bullish about stock returns over the next five years than they’ve been all year:

  • Sixty percent expect stocks to perform in line with their historical average.
  • Twenty percent said returns will be higher than their historical average.
  • Just 10 percent figure returns will be lower than their historical average.

Those results were the most upbeat survey respondents have been all year.

“Given the historically low interest rate environment, stocks should be able to sustain the higher multiples needed to drive markets higher,” says Kim Forrest, chief investment officer and founder, Bokeh Capital Partners, who expects higher-than-average returns.

“The rolling five-year compound annual growth rate for the S&P 500 recently topped 16 percent,” says Sam Stovall, chief investment strategist, CFRA Research. “The average since 1945 was 7.8 percent. Even though the next five years will likely be lower than the last five, it should still be above the long-term average.”

“Did anyone really think in March 2020, when the world was shutting down and unemployment was skyrocketing, that 2020 would be a great year for the market,” asks Patrick O’Hare, chief market analyst, Briefing.com.

“In this sense, then, it is perhaps best to fall back on the simple notion that it pays to be invested in the stock market for the long term, which means there will be bad years (perhaps really bad), but according to history, more good years than bad years on the whole,” he says.

Experts continue to favor U.S. stocks and value stocks

Bankrate’s survey asked these analysts whether they preferred U.S. or global stocks over the coming year and whether they liked growth or value stocks more in the next year.

“Home is where the heart is, it appears, with respect to favored investments over the next 12 months, as U.S.-based issues garner the most favor,” says Hamrick. “There’s also been a return to a more traditional approach, with most of the money pros believing that value stocks should top growth.”

Here’s how the answers break down on U.S. stocks vs. global stocks:

  • Fifty percent of respondents favored U.S. stocks.
  • Thirty percent preferred global stocks.
  • Twenty percent said returns would be about the same.

Those figures were in line with the results in the third quarter, when more than 53 percent of experts picked U.S. stocks and 20 percent preferred global equities.

“U.S. growth will continue to be strong,” says Dec Mullarkey, managing director, SLC Management. “Companies have also shown pricing power, so expect profit margins to remain strong.”

“Until the U.S. slips into another bear market, it will be the region of choice,” says Stovall.

Other survey respondents pointed to high valuations on U.S. stocks and the potential for higher interest rates in the U.S. to weigh on stocks there.

“The major foreign indices are trading at valuations as much as half the value of the S&P 500,” says Clark A. Kendall, president and CEO, Kendall Capital. “There are more opportunities for stronger relative performance outside the U.S. than inside.”

“The outperformance of the U.S. versus the rest of the world on a multiyear basis has created a rebalancing opportunity that money managers will likely embrace as the U.S., starting with a higher valuation, wrestles with an interest rate normalization process,” O’Hare says.

And will growth stocks outperform value stocks in the coming year or vice versa? The experts preferred value stocks:

  • Fifty percent of surveyed analysts favored value stocks.
  • Thirty percent preferred growth stocks.
  • Twenty percent said returns would be about the same.

It was the fifth straight quarter that the survey’s experts preferred value stocks over flashier growth stocks.

“Higher interest rates will likely slow the price appreciation of growth stocks,” says Stovall, who prefers value stocks.

“The top 10 stocks of the S&P 500 are growth stocks priced for perfection and are a huge percentage of the S&P 500 index value,” says Kendall, who expects value to outperform.

But growth stocks still have their fans among the experts, especially as many expect the Federal Reserve to maintain an accommodative policy on interest rates.

“Financial conditions will continue to remain accommodative next year, providing a strong backdrop for equities, in general, but growth stocks in particular,” Mullarkey says.

“Although many investors cling to the love of value stocks, it’s always been growth that drives investors,” Forrest says.

O’Hare expects returns to be about the same for growth and value stocks over the coming year.

“Value should have a performance edge as rates move higher initially on stronger economic activity,” O’Hare says. “However, the further the market gets into that rate-hike cycle, the more concerns will build about a slowdown in growth and that will provide an advantage to growth stocks that perhaps levels the performance factor for both by the end of the year.”

Methodology

Bankrate’s fourth-quarter 2021 survey of stock market professionals was conducted from Dec. 1-9 via an online poll. Survey requests were emailed to potential respondents nationwide, and responses were submitted voluntarily via a website. Responding were: Clark A. Kendall, president and CEO, Kendall Capital Management; Dec Mullarkey, managing director, SLC Management; Patrick J. O’Hare, Briefing.com chief market analyst; Joseph Kalish, chief global macro strategist, Ned Davis Research; Sam Stovall, chief investment strategist, CFRA Research; Marilyn Cohen, CEO, Envision Capital Management; Chuck Carlson, CFA, CEO, Horizon Investment Services; Kim Forrest, chief investment officer/founder, Bokeh Capital Partners; Michael K. Farr, CEO, Farr, Miller & Washington; Kenneth Chavis IV, CFP, senior wealth manager, LourdMurray.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.

Written by
James Royal
Senior investing and wealth management reporter
Bankrate senior reporter James F. Royal, Ph.D., covers investing and wealth management. His work has been cited by CNBC, the Washington Post, The New York Times and more.
Edited by
Senior wealth editor