Look out for these 2 headlines in 2022

Dear Reader, First things first, Happy New Year! Over the last few days of 2021, we talked a lot about the most important charts to watch in 2022. To kick off the new year, I thought it would be fitting to highlight a few stock market stories that I believe will be making the headlines this year. First up is earnings. Everything boils down to earnings and expectations for earnings, and that's why it's considered the most important driver of stock price over time. S&P 500 earnings are estimated to have jumped 45% year-over-year in 2021 to about $205 per share. In 2022, they're expected to increase by another 9% to about $223 per share. While 2021 set the bar high for earnings, keep in mind that there are a lot of significant indicators pointing to pent-up demand – or growth that has yet to be realized. A sky-high number of job openings, record CAPEX orders, depressed inventory levels that have yet to be restocked, and $2 trillion worth of excess savings consumers are sitting on are just some of the factors that make me think earnings still have plenty of margin. Another story to watch is what happens with valuations. According to FACTSET, the S&P 500's forward price-to-earnings (P/E) ratio is historically high at about 21. There's a ton to be said about valuation metrics like the forward P/E ratio. One important thing to remember: Contracting P/E ratios don't necessarily mean stock prices have to fall. In fact, the S&P 500's forward P/E fell from about 23 at the beginning of the year to about 21 yesterday, even as the index surged 27%. That's because the expected earnings (E) grew at a faster rate than the price of the market (P). In other words, the stock market can get cheaper even as prices go up. With today being the first day of the year that the markets are open, I'm excited to see what happens. Based on the data, it appears that 2022 could be another record-setting year for the stock market.

Andrew Graham Editor, Silver Ridge Market Report P.S. I wanted to pass along a presentation that came across my desk recently. It is well worth the watch if you are interested in learning more about the NFT space.

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