In a new investor’s note, JPMorgan Chase forecasts an end to the “global pandemic” in 2022.
“Our view is that 2022 will be the year of a full global recovery, an end of the global pandemic and a return to normal conditions we had prior to the Covid-19 outbreak,” explained JPMorgan chief global market strategist Marko Kolanovic, as recorded by CNN Business. “This is warranted by achieving broad population immunity and with the help of human ingenuity, such as new therapeutics expected to be broadly available in 2022.”
“In 2021, economies around the globe made great progress towards recovery and reopening,” Kolanovic wrote. “However, much remains to be done as the recovery was uneven, incomplete and often interrupted by new virus outbreaks and scares.”
“As the recovery runs its course, markets will begin adjusting to tighter monetary conditions, a process that will likely inject volatility,” Kolanovic said about looming stimulus tapers from the Federal Reserve.
JPMorgan is also predicting continued growth for the stock market in 2022 — specifically, a year-end target of 5,050 for the S&P 500, surpassing current levels by 8%.
In October, The Wall Street Journal polled economists on high inflation, supply chain backlogs, labor shortages, and other bottlenecks threatening the continued recovery from COVID-19 and the lockdown-induced recession. The phenomena caused respondents to slash their economic growth predictions and hike their inflation forecasts.
“Consumer spending, and by extension GDP growth, is being limited by high rates of inflation eroding the real purchasing power of consumers,” Visa economist Michael Brown told the outlet.
At the end of November, the Omicron variant rattled financial markets and prompted a selloff on Wall Street. However, early data show that Omicron may not be as bad as the original COVID-19 or the Delta variant.
Morgan Stanley analysts are therefore “not that concerned about Omicron as a major risk factor for equities,” but they caution that the Federal Reserve’s taper of monetary stimulus “will lead to lower valuations like it always does at this stage of any recovery.”
The central bank has announced plans to taper its $120 billion in monthly bond purchases by $15 billion in both November and December. The central bank could implement a more rapid pullback of monetary aid in response to high inflation and a less precarious labor market.
During remarks to the Senate last week, Powell admitted that the inflation rate is running “well above” the Fed’s long-run target.
“Most forecasters, including at the Fed, continue to expect that inflation will move down significantly over the next year as supply and demand imbalances abate,” he explained. “It is difficult to predict the persistence and effects of supply constraints, but it now appears that factors pushing inflation upward will linger well into next year. In addition, with the rapid improvement in the labor market, slack is diminishing, and wages are rising at a brisk pace.”
“We understand that high inflation imposes significant burdens, especially on those less able to meet the higher costs of essentials like food, housing, and transportation,” he continued. “We are committed to our price-stability goal. We will use our tools both to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched.”
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