Following a roughly 29 percent total return for the S&P 500 this year, history suggests that investors may expect more gains in 2022.
Keith Lerner, a co-chief investment officer of Truist Advisory Services, discovered that when the S&P 500 had a total return of at least 25% in a year, equities gained the next year. During that 71-year period, stocks increased 82 percent of the time or 14 out of 17 times.
However, as the data indicates, it’s not always sunshine and rainbows following a good year for stocks.
1981 and 1990 were two of the three years in which equities failed to advance following 25 percent or more yearly gains. Lerner notes that both of those periods began with recessions. The second poor year, according to Lerner, was 1962, which was plagued by a “flash crash” and “deteriorating investor confidence.”
Lerner does not expect a recession in 2022, but he does expect equities to see more moderate gains following a strong year in 2021.
“History is merely a guideline that should be utilised in conjunction with other elements such as the economic cycle and fundamentals.”
Nonetheless, the research on performance following years of significant market gains, strong price momentum, and small pullbacks lends more credence to our base case forecast for 2022.
That is, we continue to like equities and expect the bull market to continue. But at a considerably slower pace than in 2021. The data also suggests that investors can expect more normal and larger corrections in the future. It is as opposed to the exceptionally shallow pullbacks observed over the last year. “As a result, we remain optimistic while remaining realistic as we begin the new year,” Lerner explains.
To be sure, the market begins 2022 with significant momentum. Which goes a long way toward securing a healthy year ahead.
On Wednesday, the S&P 500 set its 70th record closing of the year. According to Alexandra Semenova of Yahoo Finance, the S&P 500 set a new all-time high every month this year. As a result, 2021 will be one of the finest years for investors in history.
Meanwhile, well-known corporations such as Apple, Home Depot, McDonald’s, Coca-Cola, and Procter & Gamble continue to hit new highs.
Last Day Market Movement
Stocks in the United States lost momentum in a sluggish trading day on Friday, with major indexes closing the final day of 2021 modestly down. But still within striking distance of record highs set during a historic year.
The S&P 500 remained flat during the day, but ended the year up 27 percent, marking its third year of double-digit gains. The Dow and Nasdaq dipped, but all indices were around record highs.
Next year is expected to be another excellent year for equities, while experts believe the S&P 500 will be unable to equal the gains seen in 2021.
