Fearless retail traders could help save the stock market in 2022

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Our call of the day from ClearBridge Investments and Franklin Templeton says retail traders may be the heroes of the stock market for 2022.

Investors look ready to hit the sidelines for Thursday, ahead of producer prices, which come a day after some nosebleed consumer-inflation data. We are also one day out from the start of fourth-quarter earnings, to be kicked off by big banks.

“After a period of choppiness following liftoff, the market has historically found its footing,” said Jeff Schulze, investment strategist at ClearBridge Investments, in a webcast to clients on Wednesday with Franklin Templeton Investments. Here’s another chart from that presentation, showing stock returns rising over time as rates rise:

In 2021, as their chart shows, investors poured more money into global equities than in the previous 25 years combined. That was predicted by Deutsche Bank and others in early 2021 who saw a “fearless” flock of new investors driving money into stocks. Schulze said while it isn’t totally clear if those retail investors will show up this year, he believes the drumbeat around “TINA” — there is no alternative — may help.

Fed. Gov. Lael Brainard will testify at 10 a.m. Eastern at her Senate nomination hearing as the next vice chair of the central bank. In prepared remarks released Tuesday, she said inflation was “too high” and the Fed needs to focus on getting it back down to 2%. Taiwan Semiconductor TSM, +2.37% 2330, +0.15% reported record profit and revenue thanks to surging demand for its chips.

 

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