European and Asian stocks, along with U.S. equity futures, fell on Tuesday after Moderna Inc. executives confirmed that the omicron coronavirus variant could evade existing vaccines. Research is still underway to determine if the new strain is as virulent as its predecessors, while developers including Moderna, Pfizer Inc. and BioNTech SE are working on potentially updated versions of their shots.
Unfazed by the latest scare, JPMorgan’s strategists forecast that the S&P 500 Index will gain about 9% from its current levels to climb to 5,050 by end-2022. “We continue to see market upside, though more moderate, on better-than-expected earnings growth with supply shocks easing, China/EM backdrop improving, and normalizing consumer spending habits,” they wrote in their year-ahead outlook note.
The strategists expect European equities to outperform U.S., Chinese stocks to fare better than emerging markets, and emerging markets to outpace developed ones.
They singled out a hawkish shift by central banks, rather than Covid-19, as the key risk to their bullish outlook, while recommending that investors retain a pro-cyclical tilt, with a preference for energy and financials, consumer services, and small caps. They favor healthcare over other defensive sectors.
See also: Investors haven’t been this bearish in 30 years, BofA poll shows
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