U.S. stock market outlook in 2022: the turning point will appear, and the structural market will dominate.

    After hitting a high in the second quarter of 2021, S&P 500 earnings growth is expected to slow sharply to 8.4% in 2022, from 44.6% last year. After the taper ends, the dynamic PE of US stocks is expected to gradually return from the current high of 21.4* to the historical average of 18* since 2015. Therefore, under the background that both the profit growth rate and the liquidity will fall in a stepped manner, the turning point of the U.S. stock market will come, and the U.S. stock market is expected to show a structural market next year.

    First half of 2022: "re-inflation" continued. In the first half of 2020, as the US economic recovery continues and inflation remains high, the energy, raw materials, and industrial sectors will continue to benefit from the widening price scissors gap between PPI and CPI, and EPS and gross profit margins are also expected to show an upward trend; while the US$1 trillion Industries such as construction and construction machinery are also expected to benefit after the infrastructure plan passed. In addition, the U.S. Treasury yield curve will steepen again, helping to widen banks’ net interest margins.

    Second half of 2022: Turn to tech/growth. With the stabilization of risk-free interest rates in the second half of 2022, the investment style of US stocks is expected to switch back to technology-led growth stocks. Considering that the pandemic has changed the working habits of residents and the continuous growth of labor costs, US companies will continue to increase CAPEX in technology, which will benefit suppliers such as cloud computing and office collaboration software. In addition, since the global chip supply is expected to be tight until the end of 2022, combined with the thematic investment opportunities of Metaverse, we are optimistic on the leading company in the chip segment.