Stocks and Bonds 2022: What Wall Street Experts Foresee

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What do stocks and bonds look like for 2022? The experts from Wall Street disagree, with some wary and others bullish. Here’s a look at what they foresee ahead in the outlook for next year.

Morgan Stanley: Seek European and Japanese stocks and bonds, avoid the US

Morgan Stanley’s strategy team advises investors to avoid U.S. stocks and bonds next year as they believe inflationary pressures in America will result in lower returns. Their advice is to prefer European and Japanese shares over those from the U.S. for providing better returns, Bloomberg reports.

Morgan Stanley sees the S&P 500 finishing around 6 percent lower than current levels in 2022, at about 4,400. 

Additionally, the economists from Morgan Stanley predict that the Federal Reserve will not raise interest rates until 2023. The analysts believe inflation will eventually move “decisively lower,” although it will remain above the 2% target of the Federal Reserve, CNN reported.

“We see plenty of challenges, including downside to the S&P 500 and U.S. 10-year yields being well above forwards,” wrote the strategists for Morgan Stanley, led by Andrew Sheets.

When it comes to commodities, Morgan Stanley prefers oil over gold, predicting metal prices will face challenges.

Goldman Sachs top bets for 2022

The analysts at Goldman Sachs believe “it will get worse before it gets better.” Sachs believes economic growth in the U.S. will eventually reach 3.9 percent in 2022. This is a reduction from a previous growth projection of 4.4 percent, Yahoo reported.

However, with inflation at a 30 year high, they believe the Fed will hike the interest rate in July 2022.

According to Bloomberg, Goldman advises spine U.S. dollar five-year breakevens as a bet that inflation will accelerate, as well as a long on three-year South African inflation breakevens.

Sachs’ strategists also recommend going long on copper.

As for stocks and bonds, Goldman suggests going long on leveraged loan index versus the high-yield corporate bond index in the U.S. dollar market.

NASDAQ: 2 top picks for 2022

NASDAQ and Motley Fool are bullish on two stocks in 2022, one you may not have heard of and one well-known name.

Cohu (NASDAQ: COHU) is a semiconductor service company that supplies handling and testing to the world’s largest producers of semiconductors, gear that helps speed up the manufacturing process of fragile and highly valuable computer chips. From 2020 through 2021, there has been a crippling semiconductor shortage. Advanced computer chips are critical to most digital consumer goods. Experts on Wall Street believe Cohu could almost double, rising 97 percent from current levels.

GoPro (NASDAQ: GPRO) is the leader in action cameras and has delivered blockbuster quarterly results. The company has just announced a new subscription service which has seen astronomical growth in sign-ups and is expected to have 1.7 million paying subscribers as we enter 2022, generating $90 million in revenue over the new year. Further, the company is expected to see 70%-80% gross margins. Analysts anticipate earnings of $0.83 per share for 2021 and going higher for 2022.