FXStreet reports that Oliver Jones, Senior Markets Economist at Capital Economics, discusses S&P 500 Index prospects.

“The data do not support the idea that equities are bound to struggle if inflation is higher than over the past decade and inflation expectations increase a bit further. Higher inflation would be a problem if it were accompanied by a substantial deterioration in the outlook for real growth, and/or a sharp tightening of the real stance of monetary policy. But we do not expect that to happen soon, even though our inflation forecasts are above consensus.”

“We still expect the S&P 500 to make some more headway over the next couple of years (albeit much less than over the past year or so given its valuation). Our end-2022 forecast is 4,500.”

“We are expecting the composition of gains in the stock market to be very different to the low-inflation, low-growth environment of the 2010s. We have made the case that the tech and growth stocks that thrived over the past decade are more likely to lag than lead the market if inflation is higher and growth a little faster, and that other areas where the Biden administration is seeking to change policy, including corporate tax and antitrust, may also push in the same direction.”