Enhancing value stocks for 2022? Wall Street say don't just focus on S&P 500

Based on reports from CNBC and Bloomberg, Wall Street see stocks picking going to be more important in 2022, and they suggest investors to focus on value stocks.

BlackRock CIO expects equities to provide high single-digit returns over the next 12 months, a more modest environment than the rally seen since the start of the pandemic recovery.

Nigel Bolton argued that instead of continuing to focus on the value or recovery trade, favoring certain sectors such as financials or energy based on their low valuations and alignment with the economic resurgence, investors will need to take a more nuanced approach in 2022. Some of the larger, more incumbent oil companies will be able to change and may have a quite reasonable future from valuation levels that potentially look optically attractive.

He thinks stock picking is a key theme in the next year. It's going to be a good market for individual stock pickers, less so for top down macro theme guys.

Not only Goldman but also Morgan Stanley agree that the Stock selection will be more important in 2022, as the post-pandemic rally that pushed stocks almost indiscriminately higher fades.

The Morgan Stanley strategists, led by Michael Wilson, said on Monday they are now more confident that the index S&P 500 will fall approximately one 6.6% by the end of 2022 to 4,400 points. While this is one of Wall Street’s most pessimistic estimates for next year tracked by Bloomberg, it is far from predicting a bear market.

In Goldman Sachs, strategists reiterated their forecast that actions will continue to advance next year, although at a “slower pace”. However, they also said that there is likely to be a small retreat.

“Stock selection will be difficult, but a necessary condition for generating significant returns in 2022, as the market separates the winners and losers and the index is basically going nowhere for the next 12 months,” Morgan Stanley said.

Goldman Sachs recommends a more "eclectic" approach next year, with a focus on “enhancing value alongside profitable, cash-generating growth businesses.”