December is when the stock market outlook for the new year dominates financial news. Many are wondering if a stock market crash could jolt Wall Street in 2022, and if so, how should they position their portfolios. Therefore today, we’ll review predictions from seven market pros.
The past year has been one of the strongest of recent memory on Wall Street. So far in 2021, the bellwether indexes — the Dow Jones Industrial Average, the S&P 500 index and the NASDAQ 100 index are up about 19%, 28% and 29%, respectively.
When we take the pulse of numerous stock market outlooks, we note that most pros remain cautiously optimistic for the new year. Given the inflationary pressures as well as uncertainty regarding potential new variants of Covid-19 and persistent supply-chain issues, many analysts point out that 2022 might be the year to be selective in what stocks to include in portfolios.
In other words, diversification with a view to including shares that do well in inflationary times seems to be a recurring theme.
Repeating the stellar performance of 2022 may not be easy for broader markets. However, seasoned investors realize that in the near term, choppiness is a given on Wall Street. But over the longer term, investing in equities remains one of the soundest ways to prepare for the future, especially retirement years.
Against that backdrop, we’ve gathered a sampling of outlooks from seven market pros:
- Bill Ackman
- Carl Icahn
- Charlie Munger
- Jim Cramer
- Goldman Sachs Group (NYSE:GS)
- JPMorgan Chase (NYSE:JPM)
- UBS Group (NYSE:UBS)
Stock Market Outlook: Bill Ackman
Hedge-fund personality Bill Ackman, the founder of Pershing Square Capital, is well-known among investors for his lucrative Covid-19 bet. His trades led to a $2.6 billion profit as he believed insurance premiums would soar during the height of the pandemic.
Ackman recently joined the hot debate on inflation, saying that central bankers haven’t yet considered the inflationary impact of environmental, social and governance (ESG) initiatives that are proving to be “persistent and growing.” He believes that the cost of transitioning to clean energy will contribute to further increases in energy costs, among other inflationary factors.
In times of such economic uncertainty, Bill Ackman focuses on durable, robust businesses that command enough pricing power to cope with inflation. Companies that can’t pass inflation on to their customers will see poor financial performance. As a result, there should be a stock market divergence through 2022.
Universal Music (OTCMKTS:UNVGY) is one of Pershing’s most significant holdings. However, with annual operating income at 21% for the past four years, Ackman thinks the market has yet to offer Universal an appropriate premium.
Billionaire activist investor and Icahn Enterprises (NASDAQ:IEP) Chairman Carl Icahn takes positions in companies, and then uses his majority share to modify the corporate policies for the benefit of investors. Icahn has vested interests in the energy, automotive, metals, real estate, pharmaceutical and home fashion sectors.
Carl Icahn recently commented on inflation, U.S. markets, monetary policy, and Bitcoin (CCC:USD-BTC) during an interview on CNBC’s Fast Money Halftime Report. Icahn believes that a market crash is inevitable, given the excessive money supply that flows into the stock market. He indicated that the stock market is eventually poised to pay the price for expansionist policies of especially the Fed.
“In the long run, we are certainly going to hit the wall,” Icahn remarked. “I really think there will be a crisis the way we’re going, the way we’re printing money, the way we’re going into inflation, I think if you look around you, you see this inflation all around you.”
In such a scenario, Icahn believes that Bitcoin stands out as a key asset. He views the digital coin as an excellent store of value in light of rising inflation. Bitcoin might see wider adoption by investors.
Noteworthy stocks in Icahn’s third-quarter portfolio include Icahn Enterprises, FirstEnergy (NYSE:FE), Cheniere Energy (NYSE:LNG), Newell Brands (NASDAQ:NWL), Xerox (NASDAQ:XRX), Occidental Petroleum (NYSE:OXY), and Bausch Health Companies (NYSE:BHC).
Stock Market Outlook: Charlie Munger
Charlie Munger is the vice-chairman of Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B). He has been Warren Buffett’s business partner for decades.
The veteran investor sees the current environment as “more extreme” than anything he had ever seen in his long career. “The dotcom boom was crazier on the valuations even than we have now, but overall, I consider this era even crazier than the dotcom era,” he remarked. “You have to pay a great deal for good companies and that reduces your future returns.”
Munger’s $225 million equity portfolio consists of five stocks. They include Alibaba (NASDAQ:BABA), Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), UBS, and POSCO (NYSE:PKX). Munger added to his position in Alibaba by 82.71% during the recent quarter. The e-commerce giant has seen its stock plunge in recent months due to a crackdown on tech stocks by the Chinese government.
Meanwhile, Munger has reiterated his dislike for the cryptocurrency market and praised Beijing’s efforts to eradicate extreme speculation. “Believe me, the people who are creating cryptocurrencies are not thinking about the customer, they’re thinking about themselves,” Munger remarked.
CNBC host Jim Cramer is one of the most widely followed financial commentators. He left Goldman Sachs in the eighties and launched his hedge fund. He also co-founded the financial news and financial literacy website TheStreet.
Given rising inflation levels, Jim Cramer believes the Fed has no option but to increase interest rates in 2022. Thus retail investors need to focus on companies that actually generate bottom-line growth. “I believe next year is the year that you want to own companies that make stuff, that do tangible things, that innovate,” he said. “We do not want companies that only grow sales but lose boatloads of money and pay themselves richly in cash and, more importantly stock, while we’re left holding the bag.”
Cramer remarked that high-growth companies that generated losses quarter after quarter saw their shares soar for much of 2021. “Once we recognize that inflation wasn’t ‘transitory’… and couldn’t be tamped down without raising rates, it’s been all bad for those companies,” he remarked.
Cramer’s top stock picks include well-known tech stocks such as Amazon, Tesla, and Apple. His list of stocks to watch include enterprise automation company Uipath (NYSE:PATH), online personal styling platform Stitch Fix (NASDAQ:SFIX), Canadian athletic apparel retailer Lululemon Athletica (NASDAQ:LULU), and chipmaker Broadcom (NASDAQ:AVGO). In addition, Cramer has indicated that Eli Lilly (NYSE:LLY) is a buy at current levels, given the positive data coming from its Alzheimer’s drug.
Stock Market Outlook: Goldman Sachs (GS)
Goldman Sachs is one of the leading investment banking and financial services institution worldwide. It offers a wide variety of finance-related services, including investment management, securities, and consumer banking.
The investment bank lowered its outlook for U.S. economic growth more than once in December. The first one was based on risks and uncertainty around the emergence of the omicron variant. Goldman’s second cutback was triggered by the failure of President Joe Biden’s $2.2 trillion “Build Back Better” spending plan. The investment bank is now forecasting real U.S. GDP growth for the first three quarters in 2022 to come in at 2% for Q1, 3% for Q2, and 2.75% for Q3.
Rising inflation has also contributed to the downturn in its economic outlook. The investment group has recently pulled forward its forecast for Fed’s expected interest rate hike to July 2022. Despite the rapid spread of the omicron variant and hawkish central bank policies, Goldman Sachs predicts the S&P 500 to rise 12% by the end of 2022.
Among the leadings stocks in Goldman’s investment portfolio are: Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), Meta Platforms (NASDAQ:FB), PayPal (NASDAQ:PYPL), Visa (NYSE:V), Tesla (NASDAQ:TSLA), Nvidia (NASDAQ:NVDA), and Alibaba.
U.S. investment bank JPMorgan’s 2022 market outlook forecasts the end of the coronavirus pandemic and a full global economic recovery. Analysts there anticipate better than expected earnings growth, improving global markets, easing supply chain issues, and a return to pre-pandemic spending habits.
The investment bank argues that the Fed will not take any risks that may halt the recovery process. JPMorgan is convinced that the central bank would rather be proven wrong for acting too late than too early.
Global co-heads of Research Marko Kolanovic and Hussein Malik cited, “Our view is that 2022 will be the year of a full global recovery, and end of the global pandemic and a return to normal conditions we had prior to the COVID-19 outbreak. We believe this will produce a strong cyclical recovery, a return of global mobility and strong growth in consumer and corporate spending, within the backdrop of still-easy monetary policy. For this reason, we remain positive on equities, commodities and emerging markets and negative on bonds.”
Chief U.S. equity strategist Dubravko Lakos-Bujas forecasts S&P 500 index to reach 5,050 (from 4,787 on 12/29) on “continued robust earnings growth as labor market recovery continues, consumers remain flush with cash, supply chain issues ease, and inventory cycle accelerates off historic lows.”
Stock Market Outlook: UBS (UBS)
Our final focus for today is the outlook provided by another investment bank. In its “Year Ahead 2022: A year of discovery” global outlook, the leading global wealth manager UBS seems to have an optimistic view for 2022. The investment bank indicates that tighter monetary policy is not expected to restrain positive equity market returns next year.
UBS expects 2022 to be a year made up of two separate halves: elevated economic growth and inflation in the first half, which will transition to lower growth and inflation during the second half.
As a result, the first six months should create opportunities in cyclical markets, including the Eurozone, U.S. mid-capitalization (cap) shares, global financials, commodities, and energy stocks. With declining growth and inflation in the second half, the bank views healthcare as well-positioned, too.
Over the longer term, UBS primarily sees investment opportunities in disruptive technologies and the clean energy transition. In particular, the group advises investors to focus on opportunities in the “ABC” of disruptive technologies — artificial intelligence, big data, and cybersecurity. Its outlook suggests that the combined revenues of the ABC technologies are forecast to grow from $384 billion in 2020 to $620 billion in 2025.
Finally, UBS highlights investors interested in these disruptive technologies should look beyond mega-cap tech stocks and identify promising mid-cap names, as well as gain exposure to early-stage tech companies.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil, Ph.D., has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all three levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.