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Brian Belski’s 2022 U.S. Market Outlook

Research & Strategy December 09, 2021
Research & Strategy December 09, 2021


In his 2022 U.S. market outlook, BMO Capital Markets’ Chief Investment Strategist Brian Belski explains why, even amid concerns around inflation and rising interest rates, the corporate earnings and economic environment are providing a solid backdrop for equities.

Watch Brian's North American market outlook.

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This is Brian Belski, Chief Investment Strategist at BMO Capital Markets

We believe US stocks will post their fourth consecutive year of positive returns in 2022 – albeit less positive – but that is OK and very normal

Our models show that the S&P 500 Index will attain a price objective of 5,300 on earning of $245

To clarify even further, we believe this “less positive” trend does not only apply to price performance – but also less positive earnings growth and diminished valuations – not to mention, a slowing trajectory of rising interest rates – and yes – the strong possibility of decelerating inflation – especially during the second half of 2022

Simply stated, double digit earnings growth, still excessively low interest rates, declining valuations and eventually subdued inflation is a very good backdrop for equities

Remember, equities are traditionally the best inflation hedge – and yes, stocks can, will and should go up alongside interest rates – after all, rising bond yields means the economy is improving – which the stock market has already been telling us thanks to its powerful rally the past few years in particular

In terms of positioning, over the next 12-18 months, we are advising clients to Overweight the following in their equity portfolios: Financials, Discretionary, Industrials and Materials, while equal weighting both growth and value, let alone small, mid and large cap stocks

However, clients are encouraged to differentiate these positions by increasing their focus on quality, growth-at-a-reasonable-price and dividend growth across all size, styles and sectors

Taking a bit of a longer-term picture, we still believe US stocks remain in a 20-25 year bull market, with the return structure of stocks over the next 3-5 years becoming more normalized to the tune of high single to low double digit returns – with longer-term time horizons led by sectors like Technology, Communication Services, Discretionary and Financials

Yes, the past few years have been nothing short of exciting and very positive for US investors – but as markets, let alone society itself begins to normalize and moderate over the next few years as the great unwind of the COVID19 pandemic ensues, we continue to focus on the positive – because after all, positive is still positive.

Brian Belski Chief Investment Strategist


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