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These 5 catalysts could keep the bull market in stocks alive and well in 2022, according to JPMorgan

Lucas Jackson/Reuters

  • The bull market in stocks is set to continue in 2022, according to a Monday note from JPMorgan.
  • “We believe there is further upside for stocks, despite a strong run so far,” analysts said.
  • These are the five bullish catalysts detailed by JPMorgan that will support stock prices into 2022.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

The bull market in stocks has plenty of gas left in the tank heading into 2022, according to a Monday note from JPMorgan.

The bank advised its clients to “stay bullish, [as] positive catalysts are not exhausted,” said analysts, who highlighted five. And while JPMorgan acknowledges an already impressive run in stocks has materialized, the strength should continue on continued economic growth across the globe.

The S&P 500 surged about 27% in 2021, extending a strong three-year streak for stocks despite a global pandemic and periods of economic shutdowns. But with the economy continuing to grow and accommodative policies from the Federal Reserve and governments remaining in place, these five catalysts should keep the bull market alive and well into 2022, according to JPMorgan.

1. Economic Growth Continues

“The pace of growth is likely to stabilize into 2022, with a number of areas of concern receding,” JPMorgan said. The bank expects 2022 to be another year of real GDP growth being above its long-term trend, especially overseas in Europe. “Inventories are very low and their replenishing should be a tailwind,” the bank said, adding that fiscal support from governments remains in place while credit spreads are showing no indications of stress.

2. The Federal Reserve

“Fed is unlikely to keep moving further and further into hawkish territory in the first half of 2022, at least relative to what is priced in currently,” JPMorgan said. The bank believes headline inflation is “likely peaking, which will result in steeper curves [and] a tailwind for stocks,” according to the note. 

3. Earnings Growth to Continue

“We continue to see gains for earnings, and believe that consensus projections for 2022 will again prove too low. Q4 of 2021 EPS is expected by consensus to be sequentially below Q3, which doesn’t typically happen. Strong beats are likely for the Q4 reporting season,” JPMorgan said.

4. Valuations Compressed in 2021

“In absolute terms, P/E multiples are elevated, but not equity yields vs. credit and bond yields. Notably, there was some multiple compression last year, driven by very strong EPS growth, and we expect in 2022 there will be further, mild and benign, P/E compression. The cushion before rising yields hurt the overall market remains significant,” JPMorgan said. 

5. Favorable Technicals

“The overall technical picture is favorable, with equities typically performing well at the start of the year,” the bank said, pointing to solid seasonal stock market performance in the month of January.

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