Stock Market 2022: Will The Party Continue?

  (Drivebycuriosity) - The begin of a new year is the time to look back and ahead as well. 2021 was again an outstanding year for the US stock market. The S&P 500, the gauge for the US market, climbed in the recent days to a new all-time high. The index gained last year nearly 27% and continued the positive trend of the recent years (chart below).

 

 

 

 

 

  

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I stay optimistic for 2022 and beyond. The stock market accompanies the seemingly eternally rising company profits. Company earnings are climbing faster than the GDPs because corporations are getting more productive over time - thanks to learning processes and technological progress. The stock market gains since 2009 are fueled by the accelerating technological revolution which got boosted by the Covid-19 crisis. It seems that the pandemic started a new Roaring Twenties, comparable to the boom phase which happened during the 1920s years after the Spanish Flu. 

Covid-19 changed behavior and accelerated the fundamental trends that have been shaping economy & society in the recent decade. During the pandemic the rise of the Internet gained even more speed and turned into a great leap. The pandemic reduced the resistance against technological progress (faz.net ). The crisis forced many people to work at home, to learn, shop, educate & entertain themselves from home. These trends are fostering digitization and raising efficiency & productivity of the economy. 

The virus boosts the digitization process, which is fostering productivity across all industries, leading to more economic growth. Microsoft`s CEO Satya Nadella said "the pandemic has proven the PC’s central role in keeping people connected, productive, and secure ...What we are witnessing is the dawn of a second wave of digital transformation sweeping every company and every industry" (transcript ). Last year Nadella noticed that “two years of digital transformation took place in two months” ( microsoft ).

We are witnessing an accelerated shift toward digital technologies that are faster, less expensive, more productive and raise creativity. Companies are compelled to streamline operations and they are using more & more Internet & and other software applications to get more efficient, creative & productive. The pandemic forced them to get faster and make their products & services cheaper and more convenient. These changes are accelerating the ongoing digitization process, using Internet and other software applications more intensely. The CEO of Bill.com, an online service, said: "We believe the ongoing pandemic has accelerated the need for businesses to focus on digital transformation” (seekingalpha). 

Covid-19 made the companies fitter and more efficient than before which translates into climbing profits. I believe that this learning process will continue and will fuel a long term trend of rising company profits & stock markets.