Alright... just a few predictions for 2022 for now. Maybe a few more next week.
Prediction #1:
Deflation
All this inflation talk in 2021 is going to turn into deflation talk in 2022. All I hear is how this inflation is 'here' to stay. Remember a lot of this most recent run up in prices has been a supply issue. In a free market economy, less supply amid the same demand = higher prices. What happens when supply catches up and surpasses demand. And what happens when we start comparing month over month and year over year price changes? Deflation.
Prediction #2
Interest Rates Aren't Going Anywhere
Interest rates will stay low for all of 2022. We may see a hike or two of the FED funds rate. Look no further than the recent reaction to the FED stating they expect 3 hikes in 2022. Treasury yields actually went down.
I actually think in 2022 we could see interest rates go even lower than they were in 2021. How crazy does that sound? About as crazy as saying the stock market will go higher during the next recession, which was something I said in 2016. In 2020 the stock market did exactly that. As crazy as it may sound, the new normal is cheap money. That is the way.
Prediction #3:
Housing Grants
Housing, like almost every other asset, real and virtual, hit a new all time record high in 2021. The asset this economy can least afford to see collapse is housing. Housing is the basis for many of my 2022 predictions. In order for housing not to collapse, we need low interest rates to remain...low. But what about those who can not afford to buy a house in this record high house price environment? Say hello to my little grant. The government is going to begin offering housing grants to those who qualify. A subsidy if you will. This will help the lower income families get a house, and at the same time it will help keep the housing market strong.
Prediction #4
S&P 5,000
It's coming. It may even come before 2021 is out. But its coming.
...to be continued
Have a HAPPY HOLIDAY SEASON - MERRY CHRISTMAS HAPPY NEW YEAR