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Bull Trader USA

: Here’s what strong stock-market gains have historically meant for the next year’s performance

It turns out, past performance is actually a very good indicator of future returns.

That’s according to the latest research presented by private-equity giant KKR in its 2022 outlook.

Analysts led by Henry McVey, head of global macro and asset allocation, looked at weekly S&P 500 price returns dating back to 1981.

Based on this year’s strong returns, the probability of a positive forward return over the next 12 months is approximately 75%. Over the next three years, it’s about 90%. “Our research suggests that, despite several macroeconomic headwinds, now is not the time to hit the panic button,” said McVey.

Through Thursday, the S&P 500 SPX, -0.87% has gained 24% in 2021.

KKR says equities remain the asset class of choice, as both “innovation and complexity should work this cycle.” They forecast the S&P 500 to reach 4,900 by the end of 2022, with 15% earnings per share growth.

Demonstrating the innovation theme — the average company in the S&P 500 now lasts 12 years as an index member, compared to 61 years in 1958.

Just 1.5% of all stocks have generated net wealth — that is, outperforming a one-month TMUBMUSD01M, 0.030% Treasury bill — in global markets since 1990, their analysis adds.

KKR expects higher inflation than consensus, seeing 5% growth in U.S. consumer prices next year versus a consensus of 3.6%. “We think inflation is going to land at a higher resting rate than it did in the past,” they said.

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