The US stock market could remain on the upside until an interest rate hike by the Fed, fuelled by the still continuing QE stimulus. The latest outlook by JPMorgan sees the S&P 500 rise by 9% next year on positive fundamentals, such as the market's good upside potential, better than expected Q3 performance by many companies, the easing of the situation in China and the alleviation of supply chain problems. JPMorgan's strategists do not expect the new Omicron strain to inflict serious damage to the US economy, due to the current supply of medicines and vaccines, as well as high immunity levels. The outlook expects the virus to be less deadly than earlier variants, which would extend the global recovery next year. Although JPMorgan analysts are highly bullish on stock market prospects in 2022, a 20-30% correction of both S&P 500 and the stock market in general followed by a recovery and further growth could still happen in this scenario. The outlook could also be intended to calm any panic in the markets caused by monetary tightening.
Earlier, Jerome Powell, chairman of the Federal Reserve, said Omicron posed high risks to the US economy. Some experts predicted the new strain would weigh down on the global economy, which would require new stimulus. At this point, Omicron seems milder compared to Delta, despite the higher transmission rate, but as the WHO pointed out, it is too early to come to any conclusions regarding the new variant. After all, few could have expected in 2019 that such a pandemic would even begin. JPMorgan's outlook could be quite premature. With the risk of a strong correction next year remaining high, investors are recommended to pay attention to technical analysis when doing index trading.
