Bank of America predicts an S&P 500 slump in 2022 — but it still believes…

Bank of America predicts an S&P 500 slump in 2022 — but it still believes...

Financial institution of America predicts an S&P 500 stoop in 2022 — however it nonetheless believes in these 3 sectors

In the event you’re nonetheless bullish on the U.S. inventory market, you could not wish to hear what Financial institution of America has to say.

The second-largest financial institution within the U.S. has a forecast of 4,600 for the S&P 500 by the top of 2022. With the benchmark at the moment hovering round 4,790, which means the financial institution is pointing to destructive returns for the approaching yr.

“The chance of a ten% correction within the close to time period or over the following 12 months is elevated,” the financial institution’s U.S. inventory and quantitative technique chief Savita Subramanian instructed Bloomberg earlier this month.

On the identical time, the Wall Road agency additionally highlighted three sectors that might outperform within the new yr. And if these don’t attraction, the financial institution’s funding chief has pointed to 1 unorthodox asset that might outperform over the following decade.


Oil platform


Let’s begin with vitality shares, which have already performed nicely in 2021. That shouldn’t come as a shock, with inflation hovering and oil costs making a robust comeback.

“Power and financials supply inflation-protected yield,” Financial institution of America writes in a observe to buyers.

Trying on the huge names, we see Chevron shares are up 38% yr so far, Exxon Mobil returned 48%, whereas ConocoPhillips loved a stellar 81% rally. To place issues in perspective, the S&P 500 returned just below 28% throughout the identical interval.

In Q3, all three corporations delivered substantial year-over-year development in each income and earnings.

These supermajors additionally present outsized dividends in comparison with the remainder of the market: ConocoPhillips pays 2.6%, Chevron provides 4.6%, whereas Exxon Mobil is yielding a juicy 5.8% on the present share value.

In fact, it’s dangerous to go deep on a sector as risky as vitality. In the event you want a extra steady strategy, you possibly can all the time construct a diversified fixed-income portfolio simply by using your spare change.


Goldman Sachs HQ

Barbara Froehlich/Shutterstock

Whereas many market contributors worry rising rates of interest, loads of monetary shares — particularly banks — sit up for them.

Banks lend cash out at greater charges than they borrow at, pocketing the distinction. As rates of interest improve, the unfold earned by banks widens.

The sector is having fun with sturdy earnings development this yr. Fairly a couple of banks additionally raised their dividends in 2021, which is nice for buyers who wish to earn a passive earnings.

For example, Goldman Sachs boosted its quarterly payout by 60% to $2 per share. Morgan Stanley doubled its quarterly dividend to 70 cents per share. In the meantime, Financial institution of America itself has elevated its quarterly charge by 17% to 21 cents per share.

These three banks are all up a minimum of 40% yr so far — and which means they don’t seem to be low-cost. For example, Goldman Sachs at the moment trades at $385 per share.

That mentioned, you possibly can all the time get a smaller piece of the financial institution utilizing a well-liked app that lets you buy fractions of shares with as a lot cash as you’re prepared to spend.

Well being care

Eli Lilly research labs

Susan Montgomery/Shutterstock

You don’t have to look very far to seek out names value contemplating within the sector — Financial institution of America has “purchase” rankings on a number of well being care corporations.

“Healthcare provides development/yield at an inexpensive value,” the financial institution writes.

Earlier this month, the financial institution raised its value goal on well being insurer Centene from $85 to $93. Contemplating that the inventory trades at $85.28 in the present day, the brand new value goal suggests a possible upside of 9.4%.

Days later, Financial institution of America raised its value goal on pharmaceutical large Eli Lilly to $300. That’s 9.2% above the place the inventory is at proper now.

Eli Lilly introduced a 15% improve to its quarterly dividend to 98 cents per share earlier this month, giving the inventory a ahead annual yield of 1.4%.

In the event you don’t wish to decide particular person winners and losers, there are additionally ETFs — such because the Well being Care Choose Sector SPDR Fund — that present buyers easy accessibility to the sector.

A “finer” strategy to outperform the S&P 500?

Andy Warhol gallery

Sergei Bachlakov/Shutterstock

Keep in mind, even shares in several sectors can transfer in lockstep with one another in occasions of volatility. Throughout a market-wide downturn, all the things can get bought off.

If you wish to put money into one thing with huge potential that additionally has little correlation with the ups and downs of the inventory market, you may wish to think about an neglected asset: fine art.

Modern paintings has outperformed the S&P 500 by a commanding 174% over the previous 25 years, in accordance with the Citi World Artwork Market chart.

And it’s turning into a well-liked strategy to diversify as a result of it’s an actual bodily asset with little correlation to the inventory market. On a scale of -1 to +1, with 0 representing no hyperlink in any respect, Citi discovered the correlation between up to date artwork and the S&P 500 was simply 0.12.

Earlier this yr, Financial institution of America funding chief Michael Hartnett singled out paintings as a pointy strategy to outperform over the following decade — largely because of the asset’s monitor file as an inflation hedge.

Investing in artwork by the likes of Banksy and Andy Warhol was once an choice just for the ultrarich. However with a brand new investing platform, you possibly can invest in iconic artworks, too, similar to Jeff Bezos and Invoice Gates do.

This text supplies info solely and shouldn’t be construed as recommendation. It’s offered with out guarantee of any variety.

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