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Paypal received an upgrade from BMO Capital yesterday with a price target of USD224 (+15% upside potential), mentioning that the company is set to benefit from strong growth ahead. On a technical picture, the stock is down 38% from its peak of USD307 in January 2021.

💡 Value stocks have come back significantly in 2021, while growth stocks  faced headwinds with a more difficult year-on-year growth comparisons and as central banks began withdrawing stimulus. Investors have rotated growth names for a larger allocation weigh to value stocks. On top of that earnings for value stocks have been very strong, and supported by buybacks thanks to healthy balance sheets.   

The main risks going into 2022 remains inflation by a wide margin, according to a Bloomberg survey last week. More persistent inflation would not only impact companies and consumers, but it is also expected to force the Fed and other central banks to act by withdrawing stimulus at a faster pace. There is also a growing consensus that as we adapt to the pandemic situation, supply chain disruptions, which have caused a steep rise in inflation, could ease. The pandemic continues to weigh as one of the main risks. Other risks worth a mention are a slowing down of the Chinese economy, as well as risks of geopolitical conflicts evolving into wars.  

It's difficult to believe the S&P 500' performance of close to 27% gains year-to-date. The index is heavily skewed towards the mega-cap tech stocks and financials which have done very well this year. It's been a year with a lot of 'scares' around the ongoing pandemic, supply-chain disruptions, inflation, central banks tightening, hedge funds blow ups, insiders record sells, and so on. Despite these risks, earnings are strong, balance sheets healthy, and corporate buybacks are at records this year. Nonetheless, fears of an overly aggressive Fed tightening and persistent inflation is weighing on the market. From a technical angle, the S&P 500 index has maintained its ascending pattern, currently closer to the top of its range.  

Former US Treasury Secretary Lawrence Summers paints a grim picture of the future of the US economy. He said it will be challenging to reduce inflation without it leading to a recession. He believes it may be too late already. Investors are very sensitive to inflation data as it's expected to direct the tone of the Fed' policies going forward. Signs of more moderate inflation would be encouraging to reassure markets. More persistent high inflation data is expected to pressure the Fed to act faster in withdrawing stimulus.