The hot job market, an economic relief, is a Wall Street concern

This hope is threatened as the Federal Reserve moves forward with a plan to increase borrowing costs Rapid rise in interest rates to curb some loans, consumer spending, business investment and the demand for labor.

Despite various challenges, the most optimistic market participants predict that employers, workers and consumers will experience a so-called “soft landing” this year, where the Fed raises loan costs, helping inflation and growth. wages to moderate without a painful slowdown that kills the recovery: Morgan Stanley strategists, for example, expect real wages to turn positive overall by the middle of the year, outstripping price increases as inflation eases and wage rates retain some strength. It could also be an advantage for stocks.

“The job market may continue to be tight in the coming quarters despite the Fed hike,” said Andrew Flowers, a labor economist at Appcast, a technology company that helps companies target recruiting ads. He still sees an “overwhelming appetite” for hiring.

While particularly low unemployment is not typically a bullish sign for equities, a few recent years have reversed the trend. In 2019, when the S&P 500 returned around 30%, year-end unemployment had fallen to 3.6%, in line with current levels.

In such an uncertain context, the forecasts on the performance of shares by the end of the year are vary widely between major Wall Street firms. With various technical measures, the trajectory of the market is currently close “make or breaklevels.

The public companies have “become extremely efficient, so based on operational performance, they have been able to shoulder these additional costs,” said Brian Belski, the chief investment strategist at BMO Capital Markets. The outlook for the bank of Belski is among the most confident, with the forecast that the S&P 500 will end in 2022 at 5,300, 23% higher than the close on Monday and well above most estimates.

“At the end of the day, I think it’s good for the economy to see these kinds of wages,” he said. “Never bet against the US consumer, ever.”

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