As we started a new year 2022, we want to present you our conclusions on markets and an analysis of our managed portfolio. In this article, we will analyse four major assets: Stocks, Gold, Oil and Commodities.
After stellar gains registered in 2021, in 2022 markets are expected to grow at a moderate peace, due to the rising risks.
We are bullish on Gold and Silver, and we are also confident on a future increasing in agricultural commodities, as we also presented in our article: https://topfxinvest.com/blog/we-anticipate-the-food-crisis-in-2022
Now let’s take a look on some factors that can influence stock markets in 2022:
- The domestic economy is growing
- Consumer spending overall is strong
- Employment is expanding, and the unemployment rate fell to 4.1% from 4.2%.
- Corporate earnings are growing by 27% (Apple it's $3 trillion company & Tesla deliveries grow by 87%)
- Covid-19 Pandemic new variant Omicron is decreases in death rates
- Rising interest rates: FED official announced this week that they see this year three, instead of two interest rates increase
- Some stocks are extremely overvalued, like FTNT (over 100%: yesterday we closed our position on FTNT) or MRNA. Also, almost 100 stocks from S&P500 index are up over 50%, which is too much in our opinion. If US interest rate will hit 5%, stocks will go down badly, similar to the 1987 crisis.
- Continuing inflationary pressures because of transportations issues. We already discussed this topic in our article Shipping Congestions and higher prices will continue until ends of 2022 according to Morgan Stanley
- Global tensions between Russia and US on Ukraine / Kazakhstan, also China and US on Taiwan, which are possible to extend into some major conflicts.
- Covid-19 Omicron it's still here, and we cannot anticipate the implications of other virus mutations. If we have other lockdowns because of new pandemic outbreaks, stocks will be badly hit.
Other opinions regarding stocks:
JPMorgan Kolanovic says to buy the dip:
“Higher bond yields should not be disruptive for equities, but rather support our call for a growth to value rotation. […] We stay positive on equities and expect Omicron will ultimately prove a positive for risk assets, as this milder but more transmissible variant speeds the transition from pandemic to endemic with a lower human toll. As this wave fades, it will likely mark the end of the pandemic Omicron’s lower severity and high transmissibility crowds out more severe variants and leads to broad natural immunity”.
On congested supply lines: “signs of supply constraints potentially passing their worst point”
BlackRock's largest fund asset has an optimistic view, but they raise concerns over China Covid19 policy:
“The Fed has signalled three rate rises this year – more than we expected. Markets seem primed to equate higher rates as being negative for equities. We’ve seen this before and don’t agree. What really matters is that the Fed has kept signalling a low sum total of rate hikes, and that didn’t change last week. This historically muted response to inflation should keep real policy rates low, in our view, supporting equities.”
“And not all spikes in long term yields are the same. Last week’s jump in U.S. Treasury yields was about the Fed signalling a readiness to start shrinking its balance sheet. This could result in a return of the term premium that investors typically demand for the risk of holding long-term bonds. This is not necessarily negative for risk assets as it can reflect an investor preference for equities over government bonds.”
Regarding China slows growth rate: “The key question is how China’s zero-COVID policy will stand up against Omicron. The policy so far has proven effective and enjoyed popular support, but has left China with almost no natural immunity. We expect the country to maintain the policy – at least optically – in this politically important year. This raises the spectre of more restrictions on activity, from targeted measures that keep the economy humming (Shanghai) to full-scale lockdowns (Xi’an). As a result, we believe downside risks to China’s growth have risen, even as Beijing appears bent on achieving its growth target this year by loosening policy.”
We think it's reasonable for Gold to push a higher price to 2500 after a huge stimulus amount, but it will happen only after the FED finishes raising the interest rates. Oil will slow down only after the inflation will also slow down, probably in the second part of the year according to Citi Bank Forecast
We added to our portfolio some agricultural commodities and precious metals (Gold and Silver). and we sold some positions like: Tesla, Fortinet, Shopify, DocuSIgn, Disney, TradeDesk. In 2022 we plan to add more dividend stocks because we have a more neutral view on this year’s growth.
Further, I'm not a big fan of Crypto currencies. 40K for Bitcoin is a good price, but if it goes further under 30K, it's a good to buy and hold bet.