US Wall Street: "The Party Is Not Over... Stock Market Will Go Higher This Year"

[Asia Economy Reporter Yujin Cho] Wall Street in the United States has forecast that the global stock market's upward trend will continue this year. The three major New York stock indices?Dow Jones, Nasdaq, and S&P 500?all maintained strong rallies last year, and the momentum for gains remains robust this year as well. However, there are also projections that the extent of the rise may be limited due to the diminishing effectiveness of the expansive monetary policies implemented over the past two years since the COVID-19 pandemic, ongoing supply chain disruptions, inflation risks, and the potential deterioration of economic sentiment.

According to Bloomberg on the 4th (local time), JP Morgan, the largest investment bank in the U.S., stated in an investor memo that the bull market will continue this year and the driving force behind stock price increases will not be exhausted.

Mislav Matecka, Head of Global and U.S. Equities at JP Morgan, assessed that "downside risks from major negative factors affecting the stock market direction?such as the Federal Reserve's monetary policy normalization, the emergence of new COVID-19 variants, and the slowdown in China's economic growth?have either not materialized or have already been fully priced into the stock market."

Earlier, JP Morgan’s 2022 annual outlook report released last month predicted that despite the spread of the Omicron variant, the global economy would show a full recovery this year. The report analyzed that economic activities would resume due to the development of treatments and widespread vaccination, supply-demand imbalances would be resolved, and supply chain disruptions would ease. As previously restrained U.S. consumers open their wallets, a strong consumption recovery is expected to drive crude oil prices up to $125 per barrel.

The U.S. stock market is expected to show an overall positive trend this year. Inflationary pressures are anticipated to peak in the first half of the year and gradually ease, and even if the Fed tightens monetary policy further, it is expected not to completely abandon its dovish stance. JP Morgan recommended "overweight" positions in European stock markets, including the UK. Sector-wise, attention was drawn to banking, automotive, and mining stocks. Emerging market equities were also seen as promising. JP Morgan stated, "It is an excellent time to enter emerging markets, which are showing recovery comparable to that of developed countries."

JP Morgan is not alone in its optimistic outlook. Earlier, Credit Suisse (CS), a Swiss global investment bank, also predicted that the "bull market" will not end this year, and Soci?t? G?n?rale, a French bank, reaffirmed its previous forecast of a 6.6% return for European stock markets this year, while maintaining a positive outlook on the U.S. stock market. Goldman Sachs and BlackRock also believe that although the pace may slow, there is ample room for further stock market gains this year.

These forecasts come as U.S. and European stock markets continue to hit record highs. On the New York Stock Exchange, the Dow Jones index rose 214.59 points (0.59%) from the previous session, marking a record high for the second consecutive day this year. The three major New York indices?S&P 500 (26.9%), Dow (18.7%), and Nasdaq (21.4%)?all posted double-digit gains last year, and the European Euro Stoxx 50 index also surged 21%.

On the other hand, there are views that the additional rise in these markets, which have begun to carry the label of overheating, may be limited. Uncertainties remain regarding negative factors that could influence market direction, such as the spread of new COVID-19 variants, supply chain issues, and inflation threats. Moreover, technical corrections are considered inevitable due to the Federal Reserve’s monetary policy normalization, which signals liquidity withdrawal.

This content was produced with the assistance of AI translation services.