Can the stock market’s momentum continue into 2022?

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By Julia Horowitz, CNN Business

The stock market just wrapped up one of its best years on record. Can it repeat its stellar performance in 2022, even when faced with inflation concerns and rising interest rates?

Wall Street certainly thinks so.

Jonathan Golub, chief US equity strategist at Credit Suisse, predicts that the S&P 500 will rise to 5,200, roughly 9% above where it finished 2021. That would mark a healthy gain, though it pales in comparison to the index’s 27% climb over the past 12 months.

Driving the call: Golub said he’s increasingly optimistic due to “robust projections for economic growth” — and because he expects companies to dole out more cash for stock buybacks, a move that lifts share prices.

He also said Credit Suisse is no longer betting that corporate taxes will rise to pay for fresh government spending. That’s allowed the bank to raise its forecast for corporate earnings over the next two years.

Another good sign: The Russell 2000, which tracks smaller American companies, rebounded in December after taking a beating in November. The fate of smaller firms is closely tied to the health of the US economy, since they aren’t insulated by their size. Their stocks are often seen as a barometer for economic expectations.

The big question mark is interest rate hikes. Near-zero rates have been the driving force behind the stock market’s rebound since its initial Covid-induced crash, providing companies with access to easy money and boosting overall confidence.

The Federal Reserve has indicated it could raise rates three times in 2022 as it tries to rein in inflation.

Should that happen, borrowing costs will still be extremely low by historical standards. But an environment of increasing rates could shift the mood.

“Risks are rising as central banks are getting closer to winding down emergency monetary support,” Goldman Sachs analysts said in the bank’s 2022 forecast for stocks.

But the strategists said the market rally is likely to continue thanks to an expected 8% increase in global corporate earnings.

“This should support a reasonably strong year for equity markets overall, contributing to another year for the new bull market, albeit at a slower pace,” they said.

My thought bubble: Year-ahead predictions are best seen as a snapshot in time. Wall Street’s market estimates for 2020 were quickly thrown out as the pandemic gathered steam. At the start of 2021, few policymakers expected inflation would rise so sharply.

Especially during a global health crisis that can obscure economic data and make it harder to see the future, it’s tough to say with certainty what’s coming around the bend. For now, though, sentiment is positive.

Omicron scrambles consumer tech’s big conference

CES, one of the technology industry’s top trade shows, is going ahead despite an unprecedented spike in Covid-19 cases fueled by the fast-moving Omicron variant.

The event will return to Las Vegas this week for the first time since 2020. At last count, more than 2,000 exhibitors had committed to showing up, though there have been a number of high-profile cancellations in recent weeks.

Microsoft, Google, Amazon, Intel and Meta (previously known as Facebook) have all said they won’t attend in-person. Other tech companies are continuing to pull out in the days leading up to the event.

The head of the Consumer Technology Association, which hosts CES, said on LinkedIn that the conference “will and must go on.”

“It will have many more small companies than large ones. It may have big gaps on the show floor. Certainly, it will be different from previous years,” Gary Shapiro wrote. “It may be messy. But innovation is messy.”

On the radar: Other big event organizers have gone a different route. The World Economic Forum in Davos, Switzerland, which was due to take place in person in January, has been pushed to early summer.

“Current pandemic conditions make it extremely difficult to deliver a global in-person meeting,” organizers said in late December. “Despite the meeting’s stringent health protocols, the transmissibility of Omicron and its impact on travel and mobility have made deferral necessary.”

Up next

Tuesday: OPEC meeting; ISM Manufacturing Index; Data on US job openings

Wednesday: CES begins

Thursday: Initial US jobless claims; ISM Non-Manufacturing Index; Bed Bath & Beyond, Conagra, Constellation Brands and Walgreens earnings

Friday: US jobs report for December; European inflation

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