By Caroline Valetkevitch

NEW YORK (Reuters – The stock market is expected to rise 7.5% by 2022 and reach 4,910. This rally will be driven by economic growth and earnings, which was the median forecast in a Reuters poll.

Those upbeat forecasts come even as growing concerns about the effect of a new coronavirus variant cloud the picture for the near term, with Wall Street https://www.reuters.com/markets/europe/wall-st-ends-lower-taper-acceleration-worries-pile-onto-virus-angst-2021-11-30 falling sharply on Tuesday, partly on concerns about the Omicron variant.

Yet the S&P 500 remains up over 21% in 2021, benefitting from an economy reopening from pandemic lockdowns.

For 2022, the benchmark S&P 500 will gain 7.5% from Tuesday’s close of 4,567 to end the year at 4,910, according to the median forecast of 45 strategists polled by Reuters over the last two weeks.

This forecast is more than the 4 725 from the August Reuters poll. However, many of the most recent forecasts for 2022 were made before Omicron news.

“Next year is going to slow a little bit, but it’s still going to be stronger than trend” for the economy, and that’s likely to extend the bull market, said Ryan Detrick, chief market strategist at LPL Financial (NASDAQ:), which has a 5,050 year-end 2022 target on the S&P 500.

According to the poll, they will end next year at 37.500. This is an increase of 8.7% over Tuesday’s close.

Profit growth in 2022 will be much lower than that seen during the boom years following the outbreak of the pandemic. However, certain strategists feel the consensus view may underestimate strength.

Brian Belski of BMO Capital markets, chief investment strategist said, “Analysts will still be behind the 8 ball,” in a virtual chat to share his outlook for next year. He forecasts the S&P 500 will end 2022 at 5,300.

Most poll respondents expected earnings to improve rather than decrease over the next six month.

Companies raised concerns about rising costs due to supply chain disruptions, and increased labor costs in recent earnings seasons. However many businesses have managed to pass these costs onto consumers so far.

Wall Street analysts expect S&P 500 earnings to grow 7.9% in 2022, compared with an estimated 49.3% growth in 2021, according to I/B/E/S data from Refinitiv.

Many strategists in the poll, however, viewed a correction or pullback in the S&P 500 in the next six months as likely.

Among the latest reasons for concern, Federal Reserve Chair Jerome Powell https://www.reuters.com/markets/us/powell-yellen-head-congress-inflation-variant-risks-rise-2021-11-30 signaled Tuesday the U.S. central bank would consider speeding up its withdrawal of bond purchases as inflation risks increase.

The Fed started reducing purchases of Treasuries, mortgage-backed securities and other assets earlier this month. This would allow it to finish the wind down by the middle 2022. To ease economic distress caused by the pandemic, the program was launched in 2020.

Savita Subramanian, equity & quant strategist at BofA Securities, told investors in a year-ahead video presentation this week that focus within the large-cap space should be on companies “with more stable and growing dividends that will benefit, rather than be hurt from, inflation.”

She stated that she likes energy and financials, which can be used to pay inflation-protected yields. BofA has a 4,600 year-end target on the S&P 500 for 2022.

(Other stories taken from the Reuters Q4 global Stock Markets poll package: