(The Journal Times) - The stock market has had a tumultuous 2022 so far, with major indices such as the S&P 500 and the Nasdaq Composite in bear market territory. But according to market professionals surveyed in Bankrate’s Third-Quarter Market Mavens survey, the outlook for stocks should improve over the coming year.
The group of experts foresees a 12% increase in the S&P 500 over the next 12 months, the eighth consecutive quarter the survey has predicted positive returns.
The survey’s respondents expect the S&P 500 to rise to 4,335 over the next year, up from 3,873.33 when the survey period ended on Sept. 16, 2022. The experts prefer U.S. stocks over international markets, but are split on whether value or growth will perform better.
“It’s a hopeful sign that despite the emergence of a bear market this year, our survey participants see upside for stocks over the next year and in the coming years,” says Mark Hamrick, Bankrate’s senior economic analyst. “They tend to be optimistic by trade to some degree, but they do see support for the market as a group.”
“For the typical long-term investor, slow and steady wins the race,” says Hamrick. “Exposure to equities has historically provided superior long-term returns. Since most Americans are ‘in the market’ for the purpose of saving for retirement, it is critically important to stay invested because predicting the timing of a positive turn in the market is virtually impossible.”
Stock investors have struggled mightily this year, with both the S&P 500 and Nasdaq down more than 20% from their highs and the Dow Jones Industrial Average down nearly 20%. Markets have pulled back as investors grapple with rising interest rates, high inflation and the possibility of a recession on the horizon. Stocks rallied during the summer before falling again, as the hope for a possible reprieve from high inflation failed to materialize and the Federal Reserve raised interest rates by 0.75% for the third consecutive meeting in September.
The market experts have been consistently positive about the outlook for stocks during the year despite the difficult environment. They expect the market to increase about 11.9% over the next 12 months, compared with 12.3% in the second-quarter survey and 11.4% in the first-quarter survey.
Not a single analyst surveyed predicted the market would fall over the next year, with the least bullish analyst predicting a rise of only 2.6%. The most bullish prediction was for an increase of nearly 21%, while the average predicted level for the S&P 500 a year from now was 4,335.
“Over the next year, inflation and central bank tightening will have peaked, which historically has been a catalyst for an equity rally,” says Dec Mullarkey, managing director of investment strategy and asset allocation at SLC Management. “The coming year will be volatile, but the average investor should stay committed to their long-term investment mix.”
Most analysts expect five-year stock returns in line with the historical average
The survey’s respondents largely expect returns over the next five years to be in line with historical averages. Fewer experts expect lower-than-normal returns over the next five years than they did in the previous survey.
Here’s how the numbers break down:
- About 46% of respondents say returns will be about the same as their historical average over the next five years.
- About 27% say returns will be lower than long-term returns.
- About 27% say returns will be above the historical average.
The numbers show a slight improvement in the experts’ outlook compared to the previous survey when about 42% expected returns to be lower-than-normal over the next five years. The market’s decline has made valuations somewhat more attractive, slightly raising future expected returns.
“Valuations are neither overly cheap nor overly expensive, which sets the stage for returns close to historical averages,” says Sameer Samana, senior global market strategist at the Wells Fargo Investment Institute.
“Given the decline this year, there has been a reset in the market, which should make average returns attainable over the next five years,” says Horizon Investment Services CEO Chuck Carlson.
Not everyone is optimistic that the worst is over for investors, however.
“The economy now seems focused on delivering better pay to workers and is less able to exploit the low-wage global economy,” says Robert Brusca, chief economist at Fact and Opinion Economics. “The ‘golden age’ of stocks is over.“
On the other side of the spectrum is SLC Management’s Mullarkey, who sees investments and technological advances driving returns higher than normal in the coming years.
“The next five years will see more capital investment from companies and countries as they near- and on-shore more of their supply chains and invest more in sustainable energy solutions,” he says. “This should motivate a cycle of innovation in new technologies.”
By Brian Baker
October 5, 2022
Methodology
Bankrate’s third-quarter 2022 survey of stock market professionals was conducted from September 8-16 via an online poll. Survey requests were emailed to potential respondents nationwide, and responses were submitted voluntarily via a website. Responding were:
- Dec Mullarkey, managing director, SLC Management
- Brad McMillan, chief investment officer, Commonwealth Financial Network
- Kenneth Chavis IV, CFP, senior wealth manager, LourdMurray
- Kim Caughey Forrest, chief investment officer/founder, Bokeh Capital Partners
- Chuck Carlson, CFA, CEO, Horizon Investment Services
- Robert A. Brusca, chief economist, FAO Economics
- Sam Stovall, chief investment strategist, CFRA Research
- Hugh Johnson, chief economist, Hugh Johnson Economics
- Sameer Samana, senior global market strategist, Wells Fargo Investment Institute
- Wayne Wicker, chief investment officer, MissionSquare Retirement
- Louis Navellier, CIO, Navellier & Associates, Inc.
