My Prediction For US Stock Markets in 2022

My Prediction For US Stock Markets in 2022

The old saying “๐–๐ก๐ž๐ง ๐ญ๐ก๐ž ๐”๐’ ๐ฌ๐ง๐ž๐ž๐ณ๐ž๐ฌ, ๐ญ๐ก๐ž ๐ฐ๐จ๐ซ๐ฅ๐ ๐œ๐š๐ญ๐œ๐ก๐ž๐ฌ ๐š ๐œ๐จ๐ฅ๐” continues to hold in 2022, mainly in the #indianstockmarket. We witnessed another correction inย #Sensexย yesterday, which had nothing to do with the fundamentals of Indian companies.

Thus, i analysed the S&P 500 index, recent fed hikes and the Q1 earnings of companies in the S&P 500 index to forecast the future for 2022 and 2023.

My analysis shows the following:

1)417 of 486 companies in the S&P 500 index (~86%) citedย #inflationย as a critical risk in their Q1 earnings call.

2)Although earnings growth beat the market estimates in Q1, much of this growth came from the energy sector, withย ExxonMobilย making a ton of cash due to high oil prices. This windfall madeย #joebidenย comment that ๐„๐ฑ๐ฑ๐จ๐ง ๐Œ๐จ๐›๐ข๐ฅ ๐ฆ๐š๐๐ž ๐ฆ๐จ๐ซ๐ž ๐ฆ๐จ๐ง๐ž๐ฒ ๐ญ๐ก๐š๐ง ๐†๐Ž๐ƒ ๐ฅ๐š๐ฌ๐ญ ๐ฒ๐ž๐š๐ซ.

3)Theย #Materialsย andย #Airlinesย industry was the other significant contributor to growth, whileย #consumerstaplesย were affected the most.ย Walmartย andย Targetย performed poorly, but the most significant decline came fromย Amazon, which shows that ๐œ๐จ๐ฆ๐ฉ๐š๐ง๐ข๐ž๐ฌ ๐œ๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐ฉ๐š๐ฌ๐ฌ ๐ญ๐ก๐ž ๐ข๐ง๐ฉ๐ฎ๐ญ ๐œ๐จ๐ฌ๐ญ ๐ข๐ง๐œ๐ซ๐ž๐š๐ฌ๐ž๐ฌ ๐ญ๐จ ๐œ๐ฎ๐ฌ๐ญ๐จ๐ฆ๐ž๐ซ๐ฌ.

With the above analysis, ๐ฆ๐ฒ ๐ฉ๐ซ๐ž๐๐ข๐œ๐ญ๐ข๐จ๐ง๐ฌ ๐Ÿ๐จ๐ซ ๐”๐’ ๐ฌ๐ญ๐จ๐œ๐ค๐ฌ ๐š๐ง๐ ๐ญ๐ก๐ž ๐ž๐œ๐จ๐ง๐จ๐ฆ๐ฒ ๐Ÿ๐จ๐ซ ๐Ÿ๐ŸŽ๐Ÿ๐Ÿ ๐š๐ง๐ ๐Ÿ๐ŸŽ๐Ÿ๐Ÿ‘ย are as follows:

1)As the real growth in the US declines due to fed rate hikes, the earnings growth will come down in the subsequent quarters. My rationale is that there is a ๐ฌ๐ญ๐ซ๐จ๐ง๐  ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐ฏ๐ž ๐œ๐จ๐ซ๐ซ๐ž๐ฅ๐š๐ญ๐ข๐จ๐ง ๐›๐ž๐ญ๐ฐ๐ž๐ž๐ง ๐ซ๐ž๐š๐ฅ ๐ ๐ซ๐จ๐ฐ๐ญ๐ก ๐š๐ง๐ ๐ž๐š๐ซ๐ง๐ข๐ง๐ ๐ฌ ๐ ๐ซ๐จ๐ฐ๐ญ๐ก. Thus interest rate hikes will lead to demand destruction that will eventually impact corporate earnings.

2)In high inflation periods, the ๐๐ž๐œ๐ฅ๐ข๐ง๐ž ๐ข๐ง ๐ฏ๐š๐ฅ๐ฎ๐š๐ญ๐ข๐จ๐ง ๐ฉ๐ซ๐ž๐œ๐ž๐๐ž๐ฌ ๐ž๐š๐ซ๐ง๐ข๐ง๐ ๐ฌ ๐๐ž๐œ๐ฅ๐ข๐ง๐ž. Thus, higher Inflation will lead to margin decline affecting valuation. Markets will ๐ซ๐ž๐ฐ๐š๐ซ๐ ๐œ๐จ๐ฆ๐ฉ๐š๐ง๐ข๐ž๐ฌ ๐จ๐ง ๐Ÿ๐ฎ๐ง๐๐š๐ฆ๐ž๐ง๐ญ๐š๐ฅ๐ฌ ๐ญ๐ก๐š๐ง ๐ ๐ซ๐จ๐ฐ๐ญ๐ก ๐ฉ๐จ๐ญ๐ž๐ง๐ญ๐ข๐š๐ฅ. Therefore companies earning substantial cash flows will trade at a premium.

3)๐€๐ญ๐ญ๐ซ๐š๐œ๐ญ๐ข๐ฏ๐ž ๐œ๐จ๐ฆ๐ฉ๐š๐ง๐ข๐ž๐ฌ ๐š๐ซ๐ž ๐ง๐จ๐ญ ๐ญ๐ก๐ž ๐ญ๐ž๐œ๐ก/๐ฌ๐จ๐Ÿ๐ญ๐ฐ๐š๐ซ๐ž ๐œ๐จ๐ฆ๐ฉ๐š๐ง๐ข๐ž๐ฌ ๐ญ๐ก๐š๐ญ ๐ก๐š๐ฏ๐ž ๐ฅ๐ž๐ ๐ญ๐ก๐ž ๐’&๐ ๐Ÿ“๐ŸŽ๐ŸŽ ๐ข๐ง๐๐ž๐ฑย for the last few years. Further, large-cap firms will perform better than small-cap because rising yields will impact small-cap stocks more.



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