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Stocks head for a rare third-straight year of double-digit returns. What happens next?

Published Sat, Dec 11 20218:11 AM EST

Michael Santoli @michaelsantoli

The book on the 2022 market is yet to be written, or even started. But it seems right now that the working title could be "Sedate Expectations." Among Wall Street strategists, professional investors and retail traders, the consensus outlook now coalescing is for a less-rewarding, possibly more hazardous market next year. This is probably not a bad thing at a time of year when reflexive optimism is more typically in the air. Brokerage-house strategists canvassed by CNBC who have released a 2022 outlook see, as an average, the S & P 500 hitting 4925, up less than 5% from Friday's record close of 4712. Chances are, this average will move a bit higher as the rest of the handicappers weigh in, but quite likely the consensus will settle right around the long-term annual average gain just under 10%. On one level, this is simply an instinctive reluctance to assume the lavishly generous returns of the past few years will carry forward, with the S & P 500 up 25% in 2021 and having delivered a 23% annualized total return over the past three years despite a 35% crash interrupting the ride. As sensible and safe as this kind of forecast sounds, a quirk of the market's stream of returns is that in any given calendar year it has been surprisingly rare for the index performance to come close to that very long-term annual average. In only five years since 1928 was the S & P 500's total return between 8% and 12%. By contrast, the index has been negative five times as often, and has gained more than 20% in more than 30 separate years, with