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Market Update|2022 Forecasts| January 10, 2022

Clinton Orr - Jan 10, 2022
I recently read a report where a Goldman Sachs’ strategist predicted the S&P 500 would be at 5,100 by year end

Well, the frigid Manitoba winter is back in full force, which means I am back to my winter routine. I go from a heated vehicle to a heated building, minimizing my time in the deep freeze!

Joking aside, in the financial world, the first part of the year is often rife with prediction and forecasts. We get inundated with forecasts for the year ahead. Often these forecasts are accompanied with specific targets, for example I recently read a report where a Goldman Sachs’ strategist predicted the S&P 500 would be at 5,100 by year end. Personally, I don’t put much value in these specific targets, I encourage people to take them with a grain of salt. More helpful is looking at the work that went into the forecast, the analysis of the potential trends and drivers of the market. At the moment, I believe, it is quite clear that the major stock markets are in an up trend, that is true in Canada, the US and most global markets. Same can be said for most commodities. As well bond yields, which influence interest rates, are also on the rise. It is certainly possible these trends can change, but at the moment there is little evidence of that.

One item I believe will change for 2022 is volatility. 2021 was unusually calm. Ben Carlson of awealthofcommonsense.com dug into the data. When referring to the S&P 500 in the US he noted, “worst peak-to-trough drawdown in 2021 was just 5.2%. That puts it in the bottom 10% of all calendar years over the past 94 years of data.” So, based on historical data, about 9 times out of 10, the market experiences larger drawdowns than what happened in 2021. The major stock markets were remarkably calm in 2021, I think it is probable that we have a few more bumps in 2022. To be clear we are not expecting a crash or large decline, as mentioned above the current trends are positive, we expect additional growth in 2022, I believe it is simply prudent to expect a few bumps in 2022.

If you have any questions on your portfolio or financial plan, please let us know. You have a full team at your disposal, and we are happy to help.

Have a great day,

Clinton Orr