NEW YORK, Dec 22 - Global financial stability is forecast to deteriorate next year after the gangbuster 2021, with a rising inflation and a rapidly spreading COVID-19 variant increasing uncertainty. As investors attempt to justify stock prices being traded near record highs, the company's profits would grow up.
The S&P 500 is going to raise about 24% this year, and the index is considering its pricing-to-earning ratio high above its long-term average, raising worries that the market may be overbought.
As far as the economy has passed, the equities are forecast to continue in 2022 after an estimated 50 percent rise this year. Today, after the companies' recovery from the recession and lockdown in the early stages of the pandemic, the remit of "Refinitiv" shows.
The consensus estimates from 2022, which have never changed so much in the past few weeks, haven't changed any further as stock indexes lost ground in fears that the Omicron variant will spread rapidly.
"We're moving into an environment where we'll likely become multiple expansion to multicompression," said Robert Phipps, director of Per Stirling Capital in Austin, Texas, referring to an underlying business's earnings trend, but his share price is not following suit, despite the shortfall and long-term profit margin.
The return cost-to-income ratio of the S&P 500 is at 21,5. A short-term metric of 15.5 is consistent with Refinitiv DataStream.
The rate of interest that the Federal Reserve will likely change now that inflation concerns are rising, Phipps said.
The rise of interest rates makes it easier for businesses to borrow and save money, while higher rates increase demand for the consumer and businesses, causing a lot more profit, especially in technology and other major growth stocks.
The tightening labor market and the flurry of oil production pushed the Fed last week to announce it would end its pandemic-era debt purchases in March. That could open the door for three quarter-percentage-point interest rate increases by the end of 2022.
Both economists forecast inflation to be 2.6% next year, over the 2.2% they projected in September.
The company remains on the verge of getting supply depressed due to the pandemic, which is currently on the move to a new, heightened phase as Omicron cases surge across the globe.
A Reuters report found the possibility that more advanced spread and renewed restrictions loomed in some countries ahead of the holidays. The U.S. COVID cases have risen 50% since beginning of month, according to a Reuters tally.
"You have many things that can go wrong," said Christopher Harvey, head of the U.S. equity strategy at Wells Fargo Securities, that sees a chance of a ten percent market decline by the next summer.
Since the US companies cut costs and paid customers many high prices, this year the company managed to keep profit margins up.
Although it doesn't seem to be clear how much the new risks will affect 2022 earnings forecasts and results.
According to Refinitiv data, 2022's S&P 500 was putting at 8.3% of Friday's monetary gain, while was 8.0% on December's end.
Earnings estimates will now increase in December, so Omicron is not even factored in the figures in this moment," said Nick Raich, CEO of the independent research firm The Earnings Scout.
Norms for America: