This page is regularly updated to capture the stock market outlook for the next few months and years. We reference comments from a variety of sources, including client letters, press releases and detailed thought leadership published by investment houses and economic institutions.
This is not investment advice. This article is financial journalism that shares predictions for the future from many leading subject matter experts. Forecasts can easily be wrong, and you should perform your own research and reach your own conclusions before investing any money. Please consider finding a financial adviser if you feel uncertain about the future or want independent advice on what investments would be right for you personally.
Stock market outlook
The current consensus outlook for the stock market in 2022 is modest growth, with relatively stronger performance in non-US equities. Please read our stock market outlook overview below for the detailed thoughts of many financial market experts.
Stock market outlook based on historical asset class returns
Before topical events are considered, it is worth considering the long term outlook suggested by historical data. In our guide to historical real returns by asset class, we published that the real return for equities from 1900 – 2013 was 5.2% excluding inflation.
This is a mean average over a long period of time which included multiple depressions and expansions of the global economy.
It cannot be used as a tailored prediction for stock market returns in 2022 but in theory, all future years could average out at close to this. The best funds to invest in to capture this return would be a global equities index fund, as this would reflect the constituency of the underlying data which drove the 5.2% metric.
Stock market outlook of Morgan Stanley
In his recent blog post, Andrew Slimmon, Head of Applied Equity Advisors Team at Morgan Stanley Investment Management, used a well-known stock market valuation metric to make a good point.
He pointed out that the S&P 500 has historically never managed to sustain a price to earnings multiple above 25. The latest multiple was 35 at the time he penned his thoughts, and as this blog post is published it currently sits at 39.
However, he tempers this warning with a caveat: “…comparing the earnings yield to the US 10-year Treasury shows that the market is actually on the cheaper side of the equation.”
What will be the best companies to invest in? He explains that when investors look outside of the FAANG stocks, they’ll notice better value.
Stock market outlook of Citibank
In their mid-year Outlook report, Citibank Private Banking shared their views on asset classes with stronger performance hopes in 2022.
Jim O’Donnell (Head of Citi Global Wealth) expressed optimism about the health of the global economy. “The world is heading for a full Covid recovery,” he predicts.
He used his foreword to express bullish sentiment towards niche non-US assets such as certain Brazil and UK property real estate assets and medical technology stocks.
However, in a broader statement, he opined that the strong recovery in the price of many assets hardest hit by the pandemic meant that looking forwards, “the breadth and scope of their potential appreciation is no longer as great.”
Turning to emerging markets, Citibank has reduced its allocation to Chinese equities thanks to recent price appreciation and would only increase further in 2022 if a correction occurred.
Stock market outlook of Barclays
In November 2021, Jean-Damien Marie & Andre Portelli co-wrote that 2022 promises a “combination of post lockdown optimism and short-term economic challenges.“
Writing to the bank’s clients in their Outlook 2022 Report, they sounded a neutral note on equities: “As a result, we expect returns on the asset class to be more muted in 2022.”
However, they suggested that investors who shy away from the booming US equities markets (which have more than doubled since the Covid lows of March 2020), could see a better return: “In the short term, sector rotations will likely come and go, and non-US equities could have an opportunity to shine. “
Even closers to home, Barclay’s expect that the UK’s economy will recover past its pre-Covid level next year. While the UK GDP shrank by 9.7% in 2020, it grew by 7.0% in 2021 and may grow a further 4.2% in 2022.
Stock market outlook of Darrow Wealth Management
When looking ahead to 2022 and 2023, Kristin McKenna (Managing Director at Darrow Wealth Management) seeks to deter investors from holding too much cash as a response to expensive equities.
Writing in Forbes in November 2021, she explains: “Does that mean you should sell to cash because the market is high? No! (Actually, investing on days where the S&P 500 closed at a new all-time high can actually produce better returns than when the market didn’t set a record.”
She goes on to emphasise the difficulties of successfully pulling off market timing, pointing to the fact that an investor needs to pick the correct time to a) pull out of the market and b) jump back in. Getting lucky once is a coin flip, but getting lucky twice has far slimmer odds.
This chimes with the process we encourage in our articles ‘Is now a good time to invest?’ and ‘When should investors buy shares?’. We also draw attention to the mental health and time-saving aspect of adopting an ‘invest steadily, all the time’ approach rather than trying to precisely time the investment of lump sums.