After nearly two full years of Covid-driven chaos, JPMorgan Chase is predicting 2022 will usher in a return to normalcy and a full healing of the economic wounds caused by the health crisis.
"Our view is that 2022 will be the year of a full global recovery, an end of the global pandemic and a return to normal conditions we had prior to the Covid-19 outbreak," Marko Kolanovic, JPMorgan's (JPM)chief global markets strategist, wrote in a note to clients on Wednesday. "This is warranted by achieving broad population immunity and with the help of human ingenuity, such as new therapeutics expected to be broadly available in 2022."
America's biggest bank expects progress on the health front will spark a "strong" recovery in the economy, marked by a return of global mobility and robust spending by consumers and businesses.
JPMorgan is forecasting continued growth for the stock market, albeit at a slower pace. The bank set a year-end target of 5,050 for the S&P 500, up by 8% from current levels.
"In 2021, economies around the globe made great progress towards recovery and reopening," Kolanovic wrote. "However, much remains to be done as the recovery was uneven, incomplete and often interrupted by new virus outbreaks and scares."
Despite vaccines, natural immunity and health restrictions, the "human toll" of Covid has been greater this year than last, JPMorgan noted. But it cautions that there are obstacles ahead, including the unwinding of easy money policies from central banks.
"As the recovery runs its course, markets will begin adjusting to tighter monetary conditions, a process that will likely inject volatility," Kolanovic wrote, adding that this shift will be a "headwind" for richly-valued markets like the Nasdaq.
Other risks identified by JPMorgan include geopolitical tensions in Europe and Asia, uncertainties around high inflation and a "looming energy crisis."
While Citigroup predicted Tuesday that US oil prices will average just $59 a barrel in the fourth quarter of next year, JPMorgan remains bullish on energy, and said it expects crude will stand at $86 a barrel at the end of 2022 and Brent, the world's benchmark, will be at $90.
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