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Highlights
- The US-based investment bank Goldman Sachs predicts that the bull run in the US stock market is expected to continue in 2022.
- The growth in the US stock market might also positively impact the UK and European stock markets as markets worldwide are interlinked.
The US-based investment banking and financial service provider Goldman Sachs predicts that the bull run in the US stock market is expected to continue in 2022. However, the investment return and investing landscape might be quite different in 2022 compared to the previous year.
The investment bank said that the S&P 500 might rise by 9% to 5,100 levels by the end of 2022, mainly due to unchanged corporate taxes by the US government in 2022 to promote business growth and economic recovery after the Covid-19 pandemic, which will positively impact the company’s profits. Also, it is anticipated that the sales of S&P 500 companies to increase by 9% year on year. In addition, the bank expects the US households, which witnessed a surge in their cash assets during the Covid-19 pandemic, will divert some of the cash into the equity market.
The stock market across the world is interlinked and has a cascading impact on each other. For example, the growth in the US stock market due to multiple factors might also have a positive impact on the UK and European stock markets. Hence, investors can expect decent growth in the UK domestic market as well.
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Let us look at some of the factors that might act as a positive trigger for the UK stock market:
Higher economic growth rate
The UK economy has been witnessing a large swing in growth rate in recent times. The Gross Domestic Product (GDP) was at 5.5% in the second quarter of 2021, though it was at 1.3% in the third quarter. The UK economy has still not recovered from the Covid-19 pandemic. However, it is anticipated that the economic growth will stabilise and will also see reasonable revival in upcoming quarters which will positively impact the stock markets.
Optimal Inflation and Energy prices
In the last few months, the surge in gas and crude oil prices in the international market has impacted the economy. The UK is a net importer of oil and gas products, and a rise in fuel prices is one of the several factors leading to a rise in inflation. As per the Bank of England report, the inflation in the UK might surge to 5%, way above the central bank’s target of 2%. Therefore, the central bank has to take certain steps like interest rate hikes or tapering its bond-buying program to bring inflation within an optimum range, suitable for the businesses and the stock market.
Lower Covid-19 cases
The UK has been reporting lower coronavirus cases after the UK government’s successful rollout of vaccination. The new cases and hospitalisation rate has dropped significantly in the UK. Also, the UK government is giving booster doses which will help to overcome the coronavirus completely. As a result, the Covid-19 led lockdown situation might not occur in the new year leading to positive sentiments for the stock market.
