Whereas the music performed, traders stored dancing, paraphrasing a line from former Citigroup

CEO Chuck Prince.

Purchasers of U.S. shares have danced to the tune of a report rise for the broad-market S&P 500 index in 2021 and are desperate to glean clues on what follows within the coming yr which many count on to be full of uncertainty even when pandemic worries start to ebb.

For Wall Avenue, one attention-grabbing query could middle on S&P 500
efficiency in 2022 after the favored stock-market benchmark outperformed the Dow Jones Industrial Common

by 8.16 share factors and the technology-laden Nasdaq Composite

by 5.50 share factors final yr, marking the widest margin of outperformance by the S&P 500 towards each its peer bourses in the identical calendar yr since 1997, in response to Dow Jones Market Knowledge.

It is just the sixth time that the S&P 500 has bested the Dow and the Nasdaq in a yr, with the earlier occurrences in 1984, 1989, 1997, 2004 and 2005.

Though, it represents a tiny pattern measurement, good points have been wholesome within the yr following. The truth is, all three benchmarks have continued to pattern larger. The S&P 500 averages 12.6{c34e2c9cd63a11c97fab811dbaaefe0cfbb1edd2527888e1a44d36f3491ee811} returns, the Dow averages an increase of 11{c34e2c9cd63a11c97fab811dbaaefe0cfbb1edd2527888e1a44d36f3491ee811} and Nasdaq Composite averages a constructive return of 12.8{c34e2c9cd63a11c97fab811dbaaefe0cfbb1edd2527888e1a44d36f3491ee811} in these situations.

There’s one other separate concern harbored by bullish traders concerning the diploma to which the S&P 500 can proceed to rise after its 26.89{c34e2c9cd63a11c97fab811dbaaefe0cfbb1edd2527888e1a44d36f3491ee811} run-up in 2021. Is there extra room to run?

Historical past means that after a acquire of a minimum of 20{c34e2c9cd63a11c97fab811dbaaefe0cfbb1edd2527888e1a44d36f3491ee811} by the benchmark, returns are comparatively muted however not insignificant, with a mean rise of seven.7{c34e2c9cd63a11c97fab811dbaaefe0cfbb1edd2527888e1a44d36f3491ee811}.

The yr after an enormous rally additionally tends to be adopted by a constructive end for the index within the subsequent calendar yr over 70{c34e2c9cd63a11c97fab811dbaaefe0cfbb1edd2527888e1a44d36f3491ee811} of the time. Features have occurred persistently the earlier 9 occasions that the S&P 500 has posted a 20{c34e2c9cd63a11c97fab811dbaaefe0cfbb1edd2527888e1a44d36f3491ee811} rise or higher.

Dow Jones Market Knowledge

In fact previous efficiency is not any assure of future outcomes, and 2022, very like 2021, will come replete with idiosyncratic themes, together with the battle with the pandemic, the battle with inflation operating at its highest degree in 40 years, and Congressional midterm elections due in November. It’s onerous to guess what would be the driving pressure however wholesome company earnings and the promise of higher days forward have been the widespread bullish denominator in previous years.

Optimism could also be cooling considerably although.

Numerous Wall Avenue companies are predicting returns within the high-single digits for the S&P 500 in 2022, if returns are available in any respect, with Credit score Suisse forecasting a 5,200 year-end end for the index, implying an increase of over 9{c34e2c9cd63a11c97fab811dbaaefe0cfbb1edd2527888e1a44d36f3491ee811}; and Morgan Stanley is predicting a 4,400 end, or an almost 8{c34e2c9cd63a11c97fab811dbaaefe0cfbb1edd2527888e1a44d36f3491ee811} decline.

Learn: S&P 500 could finish ‘fairly flat’ in 2022 amid beforehand ‘unthinkable’ destructive actual charges, says BofA strategist

Inflation that has been something however transitory and a pandemic that some hoped final yr can be within the rearview mirror in 2022 are nonetheless clouding the outlook.

That stated, the market appears to like fear, having scaled a monstrous wall of considerations over the course of the previous three years to put up double-digit returns.

The query is when will the music cease for the bulls?

Ken Jimenez contributed to this text