The stock market’s growth outlook is slowing down in the first quarter of 2022.
The stock market is experiencing one of its most unexpected and uncertain times in a long time. Businesses are still struggling with global supply chain problems. Inflation is killing the economy in several corners. The U.S. still suffers from a labor shortage, and on top of that, the U.S. consumer remains hot.
All these factors are negatively affecting the stock market and its recovery process, according to the IMF forecasts. The International Monetary Fund revised its previous forecast for stock market growth in 2022 on Tuesday. The IMF predicted that global growth this year will be 4.4%, a percentage that is lower by 0.5 points compared to their first prediction. The IMF also added its forecast for global growth for 2023 and states that the growth pace will slow to 3.8% in 2023.
On the other hand, Jim Cramer made a counter-revolutionary statement when he said that 2021’s new stocks are causing all this drama. According to CNBC, the newly minted and SPACE stocks are affecting the recovery pace of other stocks. Jim’s theory about the stock market is that it shouldn’t have a lot of stocks, because that will lead to soaring prices as well as economic losses.
It seems that Jim’s theory is in place. The international monetary fund forecasts that by the end of 2024, the global economy will lose $13.8 trillion in cumulative economic losses.
The new stocks will slow the stock market’s price recovery.
As for U.S. economic growth, the chief economist of the IMF said the U.S. will experience 4% economic growth in 2022. That lower compared to the economic growth of 2021, IMF blamed the omicron variant and its fast spread across the nation. The COVID variant, Omicron, and deals are affecting the market’s ability to grow and are slowing its recovery. Analysis believes that this is the main problem that the U.S. must deal with.
Back to Jim Crammer, the reason for soaring stocks is that the U.S. allowed so many companies to go public in recent years. Moreover, Ulrike Hoffmann, manager at Tudor Investment Corp, thinks that the IPO market will slow this year. That gives Jim’s theory extra points. The new IPOs and space deals seem to be slowing down the market, it seems.
Obviously, the global economy is still suffering from the 2021 downs and dives, and investors are fatigued and overwhelmed. The Nasdaq and tech sectors are currently the most sensible, while the Dow futures and S&P 500 are rising slightly. Investors feel that tech stocks are less interesting and their cash flow is less valuable.
As for the SPAC deal, in October, the sector recorded its highest number of deals since March 2021. According to CNBC, October totaled 57 new SPAC deals. This is positive news for the SPAC sector and deals, but Jim Cramer believes the opposite. He has already expressed his worries about the high number of new IPO stocks and SPAC deals.
In conclusion, adding new public stocks at the moment won’t help the recovery and economic growth for the U.S. and the world. For now, the earrings and figures seem to be on Jim’s side. The most profitable companies are the most experienced ones.
If we look at 2021’s earnings number, we will notice that the earnings outperform the losses. Plus, most earnings come from major enterprises and corps, while most losses come from early-seed or new publicly listed stocks.