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Market Strategy 12/13/2021

  • John Stoltzfus
  • December 13, 2021

How High the Moon? (revisited)

We’re peering over the Market Strategy Radar Screen and we’re offering a 2022 price target and our rationale for how we could see it come to pass.
Key Takeaways
  • We initiate our price target for the S&P 500 by the end of 2022 of $5330. Our price target is based on our earnings projection of $230 for the S&P 500. Our price target is based on a number of assumptions that we provide in today’s report.
  • This week, investors will likely focus on the Federal Reserve’s FOMC meeting which concludes on Wednesday. Investors will look for clarification for how long the tapering will take and any indication of how long or how far the Fed tweaks its benchmark rate higher.
  • Economic data last week saw the CPI inflation rate rise to a 40-year high as supply bottlenecks and labor shortages continue to hamper the US economic expansion. 
fed reserve

We initiate our target price of $5330 for the S&P 500 by year-end 2022 or for a 13% rise above the benchmark’s closing price on last Friday December 10. Our earnings projection of $230 for the S&P 500 calls for earnings growth in 2022 of around 12% and a P/E multiple of 23x.

Our price target is based on a number of assumptions that include:

  • Further success by science in addressing and responding to challenges brought by the COVID-19 pandemic and its variants;
  • Continuation of the stateside economy to show resilience amidst the current period of uncertainty in a process of reopening
  • Positive corporate revenue and earnings trends likely to persist as the US economy moves out from under pandemic oppression toward the next new normal.
  • Monetary policy at the Federal Reserve to remain supportive of the US economy as the central bank tapers to end its monthly bond buying program over the course of the next three to six months.
  • The length and pace of the tapering period is to be determined by the degree of resilience exhibited in economic data over the course of the taper as well as by improvements in other key areas including: suitably addressing higher inflation trends and restoring supply chain efficiencies
  • A start of a first tranche of stimulus tied to infrastructure spending if not in the first quarter of 2020, then before the end of the first half of 2022.
Quotation from Aenean Pretium

We do not expect the Fed to slam on the brakes to choke off liquidity but rather look for the central bank to “pump the brakes” as lightly as it can as it takes the mechanisms of emergency stimulus off gradually.

We base our target price on further assumptions that include:

  • Continuation of approvals by the FDA; successful rollouts and acceptance by the public of vaccine(s) capable of stemming the spread of the COVID-19 pandemic and its variants including Delta, Omicron and others.
  • The equity market’s capacity to discount the success of said vaccines in stemming the spread of COVID-19 as well as
  • Continued material progress in reversing the societal and economic disruptions wrought by the pandemic since Q1:22
  • A further broadening of investor appetite (among professional and private investors) for stocks that favor diversification and utilize both growth and value segments of the market in what is likely to remain a relatively low interest rate environment that favors equities, real assets, and other assets
The Fed’s Policy Comes into Focus

This week investors will be attuned to the outcome of the Federal Reserve’s FOMC meeting with hopes held high for some clarification for just how long the tapering process will take (three months? six months?) and just when might the Fed expect to begin tweaking its benchmark, the fed funds rate.

In our view, central bankers will likely dole out information over the course of the next two quarters as they consider just how soon the “training wheels” come off as the economy likely continues to gain traction.

We do not expect the Fed to slam on the brakes to choke off liquidity but rather look for it to “pump the brakes” as lightly as it can as it takes the mechanisms of emergency stimulus off gradually.

The market may express frustration with a tantrum or two as the process takes place. However, barring any unexpected exogenous shocks or black swans making an appearance on the scene—things could actually continue to get better even as some things worsen. As a bard and Frank Sinatra once sang, “that’s life and you can’t deny it.”

Where We Stand
  • We continue to favor equities in the current transitional environment.
  • We remain overweight US equities while maintaining meaningful exposure to international developed and emerging equity markets.
  • We persist in favoring information technology and cyclicals over defensive sectors as well as maintaining exposure across large, mid, and small capitalizations.
  • For style, we prefer a barbell approach with both value and growth in what is likely to remain a low interest rate environment, even after yields move higher in response to what we expect will be a sustainable economic expansion stateside that will feed a global economic recovery (see p. 10 for our global asset allocation).
  • Dividend portfolios incorporating positions in “growthier” value and in GARP (growth at a reasonable price) stocks in our view are worth consideration, particularly for investors seeking current income with potential for capital gains.
  • Among the immediate risks that populate the landscape are COVID-19 and its variants, the process of economic re-openings stateside and elsewhere around the world, perceptions of inflation risk, supply chain disruptions, labor shortages, domestic politics, geopolitics and the perennial risks that lie in the realm of the unexpected. 
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John Stoltzfus


Chief Investment Strategist, Oppenheimer Asset Management Inc.

John is one of the most popular faces around Oppenheimer: our clients have come to rely on his market recaps for timely analysis and a confident viewpoint on the road forward. He frequently lends his expertise to CNBC, Bloomberg, Fox Business, and other notable networks.

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