Stock market outlook 2022: can double-digit gains continue?


What would you like to know

  • Strategists favor developed market equities over emerging markets in 2022.
  • Profits will lead to gains, but dividends and buyouts will also be factors.
  • Emerging market equities are likely to come under pressure from Chinese policies.

Despite expectations for rate hikes in response to rising inflation, the outlook for the global stock market in 2022 is positive.

An early indication of this: U.S. stocks rallied on Wednesday after the Federal Reserve announced it was accelerating its reduction in asset purchases, which are now expected to end in March 2022 instead of June, and policymakers in the Fed have indicated a preference for three rate hikes soon. year, up from one or two increases that strategists had previously expected.

U.S. equities are expected to generally dominate other developed markets in 2022 despite their larger outperformance this year and the resulting richer valuations. Forecasts of strong economic growth and healthy earnings should support the performance of US equities next year.

Profits are seen as “the main driver of performance as the US stock market continues to grow towards its above-average valuation,” according to JP Morgan Asset Management. But dividends and buybacks, which some companies have suspended in 2021, will also provide support, according to Alan Berro, equity portfolio manager at Capital Group.

“Dividends are back in fashion,” Berro said during a recent outlook webinar. “Many companies have excess capital that will be redeployed in the form of regular and catch-up dividends and will approve the share buyback.”

Despite the favorable outlook, U.S. stock market gains in 2022 are unlikely to approach this year’s gains, which are already around 25%. They are expected to stay in the upper single digits.


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