Now that January has officially started, I’m reminded that the month is named for the Roman god Janus. In ancient Roman myth, Janus is the god of beginnings and endings. He is depicted as having two faces, because he simultaneously looks to the future and the past. Janus is the god of time, gates and passages.

Let’s take a look at the stock market’s recent past and see what it portends for 2022. Will the past serve as prologue? In other words, will history set the context for the future?

So far, the omens are promising. U.S. stocks last week reached new highs during a “Santa Claus” rally that was broad based. In a future article this week, I will provide a precise recap of the investment highlights of calendar year (CY) 2021.

Small-cap stocks racked up a positive year but trailed large-caps amid concerns about the durability of the economic recovery, rising inflation, supply chain woes, Federal Reserve tightening, and the Omicron variant.

Technology stocks also ended 2021 in the green, but lost momentum in the final weeks of the year, as investors braced for rising interest rates. Future cash flows are valued according to the prevailing interest rate. Since the tech sector is more growth-oriented than others, its future earnings are now worth less in a rising-rate environment.

The Federal Reserve is accelerating its tapering process and it’s now on a path to finish its bond purchase program in Q1 2022. I don’t think tapering will kill the bull market, but we are in for a bumpy ride as investors react to each new pronouncement from a more hawkish central bank.

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For 2022, let’s see where analysts are most optimistic and pessimistic in terms of their ratings on stocks in the S&P 500.

Overall, there are 10,785 ratings on stocks in the S&P 500. Among these ratings, 56.8% are Buy ratings, 37.2% are Hold, and 6.0% are Sell.

At the sector level for the new year, analysts are most optimistic about energy (67%), communication services (62%), information technology (62%), and health care (61%), according to research firm FactSet. These four sectors have the highest percentages of Buy ratings.

Conversely, analysts are most pessimistic for 2022 about the consumer staples (42%), financials (50%), utilities (51%), and real estate (54%) sectors (see chart):

The estimated year-over-year earnings growth rate for CY 2022 is 9.0%, according to FactSet. Projected earnings growth for this year is impressive, when you consider that the baseline is record-high earnings growth of 45.1% in CY 2021.

Ten of the 11 S&P 500 sectors are projected to report year-over-year growth in earnings, led by the industrials and consumer discretionary sectors. Financials is the only sector projected to report an earnings decline.

The economic calendar this week starts the new year with a bang, as several reports with market-moving power crowd the queue. The most important reports (January 3-7) are as follows:

• Monday: Markit manufacturing PMI (final), construction spending.
• Tuesday: ISM manufacturing index.
• Wednesday: ADP employment report, Markit services PMI, FOMC minutes.
• Thursday: initial and continuing jobless claims, ISM services index, factory orders.
• Friday: nonfarm payrolls, unemployment rate, average hourly earnings.

The Conference Board forecasts that the U.S. economy will grow by 3.5% on a year-over-year basis in 2022. It’s my contention that supply chain bottlenecks in 2022 will greatly ease, removing a major headwind that’s impeding equity markets.

Bet on reopening…

Despite Omicron worries, the economy is healing. The resumption of business closures is a political impossibility and, despite the theatrics on cable news, the variant is showing signs that it will peak by the end of January. I generally advise you to buy on Omicron-induced dips (but do so, judiciously).

As you position your portfolio for 2022, the smart bet is on cyclical reopening plays. Notably, the airlines industry is predicted to report a profit in CY 2022 ($4.5 billion) compared to its loss in CY 2021 (-$15.0 billion).

The latest inventory reports reveal that U.S. retail inventories increased by 2% in November compared to October, well exceeding the consensus expectation for 0.5% and a dramatic rise from the previous month’s reading. Wholesale inventories also rose by 1.2%.

These readings underscore my view that improving inventory management will be a key pillar of bullish conditions in 2022, as supply chain snags ease and business investment picks up to meet higher demand.

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John Persinos is the editorial director of Investing Daily. Send your questions or comments to: mailbag@investingdaily.com. To subscribe to John’s video channel, follow this link.