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Market Strategy 1/03/2022

  • John Stoltzfus
  • January 3, 2022

“Give Me Money (That’s What I Want)”

Equity valuations likely reflect investor need to meet goals rather than fear and greed
Key Takeaways
  • Equity markets moved broadly higher to close 2021. In the course of the year, equities outperformed fixed income as global interest rates remained near record lows and economies around the world moved toward “the next new normal” and beyond the pandemic.
  • Economic data this week and the start of Q4 earnings season next week are likely to be key drivers of the direction markets take at the start of this year.
  • In this week’s publication we include growth and value stock index performance, comments on oil prices, the CRB Commodities Index, the yield on the 10-year Treasury since 1966 and recap global equity market performance, valuations as well as historical performance of the S&P 500 from 1990 through the end of 2021.
2022 lightbulb

The first week of 2022 begins with a sizeable brace of economic data stateside capping the year just ended that presents investors with opportunity to ponder and seek out clues as to how the first part of the new year might shape up.

Monday’s data flow is light with just construction spending on the calendar. Look for the data flow to pick up pace on Tuesday with the ISM Manufacturing Index, the JOLTS Job Openings index and Wards total vehicle sales. Wednesday will bring Mortgage applications, the FOMC minutes from the December meeting with Thursday scheduled for release of the US Trade Balance, Initial and Continuing jobless claims, Factory orders, ISM Services Index and November Durable Goods orders.

The main event for the first week of the year takes place on Friday with the jobs numbers (change in nonfarm payrolls, private payrolls, and manufacturing). Also for Friday release are the unemployment rate, the underemployment rate, average hourly earnings, labor force participation rate and data on consumer credit.

Quotation from Aenean Pretium

With 2021 having provided a third year in a row when the S&P 500 closed higher… Many investors and observers wonder if the market “can pull the rabbit out of the hat for a fourth year”.

We’d note that the Bloomberg survey of economists looks for 400,000 jobs to be added in the December nonfarm payroll survey versus the 210,000 jobs gain reported in November. A significant shortfall in the jobs number could raise some volatility, while a surprise to the upside could add gains to the Santa Claus rally that pushed stocks higher at year end.

All in all, this week brings plenty for investors to ponder and for the market to digest.

With 2021 having provided a third year in a row when the S&P 500 closed higher, many investors and observers wonder if the market “can pull the rabbit out of the hat” for a fourth consecutive year. From our perch on the market radar screen we’ll credit improving fundamentals, monetary policy, fiscal stimulus (albeit somewhat excessive) as well as business and consumers doing what they do best for the markets’ performance rather than magic, rabbits and hats.

While market multiples, particularly in the large cap arena of the S&P 500, are high from an historic perspective the yields across most categories of fixed income and particularly those among US Treasuries would suggest that on relative valuation the latter does not yet offer much competition to the potential performance that equities might deliver as the economies of the US and other nations around the world re-open.

Time will tell the outcome soon enough if not as soon as most would like to know.

For now we suggest once again that investors consider in the new year that patience is a virtue and that diversification has been shown to be a prudent practice over the course of history.

For now with fixed income yields at current levels (particularly those reflected by US Treasuries and an array of international debt related securities)—investors with intermediate to longer-term goals and objectives are likely to lean more on stocks for potential returns when seeking to meet their needs—so long as fundamentals keep improving even if just modestly if not dramatically.

We initiated our price target for the S&P 500 by the end of 2022 of $5330 on December 13 (See the Market Strategy of December 13, 2021 for details and our assumptions.)

Happy New Year!

John Stoltzfus headshot

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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