Citi’s Chronert Succeeds Levkovich, Sees Slow Stock Gain in 2022

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(Bloomberg) — Scott Chronert, a Citigroup Inc. strategist who assumed Tobias Levkovich’s role on an interim basis after his death, made his debut prediction on the S&P 500 with a guarded outlook.

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The benchmark gauge will rise to 4,900 by the end of next year, Chronert wrote in a client note late Friday. That would represent a 6.4% increase from the index’s last close and mark a dramatic slowdown from this year, when the market rallied more than 20% in the first 10 months.

Chronert expects companies in the S&P 500 to report a profit of $220.54 a share in 2022, roughly an 8% increase from estimated income of $203.69 this year.

With the Federal Reserve poised to remove its emergency support for the economy, Chronert says the valuation tailwind that equities have enjoyed over the past decade “has mostly run its course.” He anticipates volatility to rise in the first half of 2022 as the central bank’s tapering sparks concern over policy missteps.

The forecast is “suggesting a generally constructive view, albeit below the historical average annual returns of recent years,” Chronert wrote. “At a very high level, we have a hard time turning structurally cautious on U.S. equities as long as there is a path toward improving aggregate earnings expectations.”

Chronert’s 2022 price target for the S&P 500 is tied with Goldman Sachs Group Inc.’s David Kostin and Lori Calvasina at RBC Capital Markets. Jonathan Golub at Credit Suisse is more optimistic, calling for the index to end the next year at 5,000. Savita Subramanian at Bank of America Corp. is less sanguine, eyeing 4,600.

Levkovich, Citigroup’s longtime chief U.S. equity strategist, passed away after a car accident. Chronert, who has been with the bank for more three decades, specializes in small and mid-cap stocks as well as exchange-traded funds, according to his profile on LinkedIn.

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