Only 10 US stocks really matter
And bank shares don’t always rise with interest rates
In 2022, keep an eye on the S&P 10
The air is full of holiday cheer, but the sell side’s equity strategists are not breathing it in. Here’s Bank of America, late last month:
“We forecast the S&P 500 at 4,600 by year-end 2022 (minus 2 per cent from here) . . . Drivers for our outlook: a higher discount rate, US GDP primacy vs China, rising capex [and] slowing consumption.”
And Morgan Stanley:
“As we have long noted, the inevitable midcycle transition when economic growth decelerates, the pace of profit revisions slows and financial conditions tighten is usually the harbinger of a shift in policy accommodation that drives interest rates up and [profit/earnings ratios] down . . . As the market’s P/E reverts to a more normal 18 from the current 22.5, the headwind is enough to constrain our base-case forecast of 4,400. If that is correct, the S&P 500 will be 3 per cent lower a year from now.”