Where is the economic pendulum now?

Another eventful year for financial markets in 2022 – 10 interesting facts. I’ll follow the same structure as my 2021 memo.

“There are two kinds of forecasters: those who don't know, and those who don't know they don't know.” – J.K Galbraith.

Predictions are hazardous but entertainment is guaranteed. Read on for entertainment

1. #Inflation: is sticky and not in control. “Transitory” word search was trending all of 2021, Fed chairman officially retired the word when US senator Pat Toomey pointed out “everything is transitory — life is transitory”.

2. Monetary policy: The era of cheap money – near 0% interest rate is over, the rates are raising all over the world and the asset prices are dropping across all categories.

3. Bonds - low yields for decades punished risk-averse investors and pushed them into risky territory, it all changed in 2022- thankfully timely intervention by BoE saved the pension funds.

4. #Equity Market - falling stock markets have wiped out more than $10 trillion in US markets, putting more pressure on family balance sheets in 2022. Remember, the inflow to equities in 2021 exceeded the combined inflow of the past 20 years.

5. #Valuation: S&P 500 is trading @ 19 P/E, - 6 points vs 2021 and in line with 2019. The interest rates are a lot higher vs. 2019 and still heading north, it is probably too early to call the market bottom.

6: Inequality: If you do not own real estate or equities, you were certainly left behind in 2021. You are in trouble If you do not have sufficient cash to withstand inflation and falling asset prices. Uncle Sam and the Fed may not have weapons to help.

7. #China: Ideologies, faith, and power do not feed the citizens. “It’s the economy stupid” – remember the phrase, it’s time for govt to focus on the economy in 2023.

8. #cryptocurrencies : The messiah of Crypto Sam Bankman-Fried is in trouble, the FTX fiasco has damaged the asset class. Is this dot.com crash moment for Cryptos? Only time will tell.

9. #Memes stocks are dead for now. Interest rates are the pesticides that kill financial weeds.

10. Watch out for #leverage & #liquidity, they will be weapons of mass destruction. It is impossible to predict the timing or origin. Be alert.

What next? if only I knew, life will not be as interesting.

Note: Views are personal and certainly not investment advice. Blogs are my weekend exploration. I write about topics that are interesting to me.

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