December 10, 2021
Good morning,
It is prediction season with research shops of all shapes and sizes marching out their 2022 forecasts. NDR (Ned Davis Research) hosted their all-hands-on-deck conference call yesterday. They are following their 2021 – A Year of Recovery theme with 2022 – A Year of Reversals this year. Broadly speaking they are talking about reversals from favorable market conditions to ones looking less favorable; eco growth, earnings, valuations, inflation, and momentum to name a few. Their forecast is not as gloomy as that sounds, but cyclically, recovery is what follows a recession (2020), and reversals do follow recoveries.
The highlights:
The probability of a recession remains very low but expect that to rise in the second half
GDP growth forecasted at +3.5% U.S. / +4% Euro / +5.25% China
Inflation forecasts expected to cool into the second half
S&P 2022 YE target: 5,000
Risk of 10% corrections much higher (that’s up from 5% corrections this year)
NDR produces a forecast each year to not live by. Their mantra is “Being Right or Making Money”. The models that they do live by are built on the four methodologies of market analysis (Fundamental, Technical, Macro and Behavioral) and when those models call for an allocation change, they make them regardless of what they’ve predicted in their forecasts. They produce forecasts to help their clients see what might be ahead but recommend investing in line with their data driven models.
As of yesterday, they still like the Tape and still think the Fed is postured benevolently (tapering is still adding liquidity, just not as much) but overall acknowledge that we are likely in the late stages of a cyclical bull market.
Hope you have a very nice weekend.
Be well,
Mike