Huntington Investment Officer: Markets Look to Stimulus Outcome

YOUNGSTOWN, Ohio – While there are still some constraints on sectors of the economy, analysts and investors at Huntington Private Bank believe the recession caused by the coronavirus pandemic has ended.

Leaders of Huntington Private Bank, the wealth management and high-value account arm of Huntington National Bank, gave a brief presentation Wednesday on what’s likely in store for the stock market in the coming year.

“There’s pressure on the service sector, on small business. Overall, the economic numbers say to us that [the recession is] over,” said John Augustine, chief investment officer at Huntington Private Bank.

What the markets are watching now, he continues, are largely the talks of more stimulus funding and, for 2022, how the federal government will finance the nearly $7 trillion expected to be spent on such stimulus packages, including the $2.2 trillion Cares Act, the $900 billion relief bill passed in late December and the current $1.9 trillion package being discussed by the Biden administration and Congress. Also forecast is an infrastructure bill coming over the summer; during his campaign, President Joe Biden outlined his “Build Back Better” plan that called for $2 trillion in such spending.

“This year, we think markets will focus on stimulus. Next year, we think it’ll turn to how all this spending will be financed,” Augustine said. “Markets haven’t reacted so far the way a lot of investors thought they would’ve. They moved up after the election, with changes in Congress. A lot of that has to do with markets being focused on different things, one of them being stimulus spending.”

Since the election, and Pfizer’s announcement shortly after that its vaccine was effective, most major stock and commodity indices “haven’t looked back,” he said, with the S&P 600 being the largest increase at nearly 45%. Only gold and the Bloomberg Barclays intermediate investment grade bond staying virtually even.

Stock valuations have been rising with them, with some performing “abnormally well,” Augustine said.

“In this environment, we hear a lot about Bitcoin and IPOs and [special purpose acquisition companies] and individual technology companies. In every bull market, something will go up faster than it arguably should,” he said. “If you have some of those that are up abnormally high, trim some and periodically collect some profits, and move into areas of the stock market that have not moved so high.”

At this time of year, with publicly traded companies releasing their fourth quarter and full-year earnings, there may be surges in their stock price.

“As we’re going through earnings reports, most are coming in above expectations. The only issue there is that stocks can run up on those earnings before pulling back a bit,” he said. 

Copyright 2022 The Business Journal, Youngstown, Ohio.