S&P 5,000? Here's What Analysts And Investors Expect From The Stock Market In 2022

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As 2021 winds to a close, investors and analysts are already shifting their focus to 2022. This year marked the third consecutive year of at least 16% returns for the S&P 500, leaving investors to wonder just how much more upside they can expect from the SPDR S&P 500 ETF Trust (NYSE:SPY) in 2022.

Landmark Target: LPL Financial Chief Market Strategist Ryan Detrick recently said he’s optimistic about the potential for the S&P 500 to hit the landmark 5,000 level in 2022.

“We believe the S&P 500 could be fairly valued at 5,000–5,100 at the end of 2022, based on an EPS estimate of $235 for 2023 and an index P/E between 21 and 21.5,” Detrick said in LPL’s 2022 outlook report.

Detrick said hitting and exceeding that price target range next year will hinge largely on corporate earnings. If interest rates stay lower for longer than the market expects, a strong economy and positive investor sentiment could support additional earnings upside and even further earnings multiple expansion, he said. However, if inflation, wage growth and rising interest rates pressure margins in 2022, Detrick said any S&P 500 earnings growth at all may be hard to come by in 2022.

For the S&P 500 to hit 5,000, it will need to gain only about 6.2% from current levels, a relatively modest annual return for the index on a historical basis.

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Opportunities Ahead: In his Daily Market Notes, Navellier CIO Louis Navellier recently said investors should continue to have opportunities in the market in 2022, but stock selection could become more important.

“Although year-over-year earnings comparisons will become more difficult in 2022, a narrower market is good news for growth stocks and dividend growth stocks and bad news for the ‘index fund’ crowd, since growth stocks and dividend growth stocks have traditionally prospered in a narrowing, more selective, stock market environment like this,” Navellier said.

He noted that Democrats are also likely to lose control of both the House of Representatives and the Senate in the 2022 midterm elections, and Wall Street has historically favored a divided government.

Investor Survey Results: DataTrek Research’s annual investor survey suggests investors are executing modest, positive returns from the S&P 500 in 2022. In fact, 81% of investors surveyed are anticipating S&P 500 returns in 2022 will be between 0% and 15% for the year, with 42% of respondents anticipating returns in the 5% to 10% range.

“No wonder December is proving difficult, for if an investor thinks next year’s gains will be limited then selling ahead of a so-so year is a solid strategy,” DataTrek co-founder Nicholas Colas said.

Colas recently pointed out that the aggregate 12-month price target for the S&P 500 based on analysts’ single-stock price targets is 5,225.

Benzinga’s Take: It’s extremely difficult to predict what the stock market will do in any given year, but the S&P 500’s long-term track record has been remarkably consistent throughout history. Since 1925, the rolling 35-year annual returns for the S&P 500 have always stayed between around 8% and around 15%.