Transcript
Good morning, my name is Matt DeCicco. I'm director of equities at Lord Abbett as well as a portfolio manager on our innovation growth strategies.
Title: Reasons to Be Optimistic About Equities
I'm optimistic for markets heading into the new year. The US economy is extremely strong. Unemployment is very low. The consumer is healthy. Corporate profits are surging.
All of that is very good for S&P earnings. In fact, S&P earnings next year will most likely exceed $225 per share and the S&P of 100 today is north of 4500.
Which means that the earnings yield on the S&P 500 is just about 5%, which compares very favorably to the 10-year treasury yield at about 1.5%. Historically when the S&P 500 yield is that much higher than the 10 year yield, forward returns for the market are very positive.
Title: Two Risk Factors to Keep an Eye On
I am optimistic about equities heading into the new year, but there are two key risks in the interim. The first is that inflation remains high, and while a little bit of inflation is OK, for the markets too much is not good.
Over the course of the year, we expect that the secular forces that kept inflation low before the pandemic will reassert themselves. Those forces are globalization, demographics, and the tech revolution.
The second key risk weighing on the market in the near term is the surge in Covid cases due to the omicron variant.
My expectation is that cases are going to rise rapidly and will peak in the next 6 to 10 weeks. This will also create some short term volatility but presents an opportunity as well as the risk fades.
Taken together i'm optimistic about markets heading into 2022, but we have to navigate some near term volatility caused by inflation, as well as the on the covid variant.
Thank you for watching and thank you for your continued interest in Lord Abbett.