It's prediction time! Where we look into our crystal ball and make a guess as to what's ahead:
The stock markets will experience at least one 10% drawdown in 2022.
The S&P 500 will finish up 7% (5,140) on December 31, 2022.
The 10-year Treasury yield will be at 2.3% on December 31, 2022.
The Fed will raise rates twice in 2022. We do not feel that the first rate hike will happen until pretty deep into the midterm election cycle, probably late summer. The second will likely happen right around the election. The Democrats are in a very fragile situation and currently cannot allow the Fed to raise rates too quickly and negatively affect the stock markets and economy.
Inflation will be transitory, if your definition of transitory is a long time. The Fed will have to address this by raising rates at some point, but supply chain issues are not going away any time soon. Wages are going up and these costs will be passed down to the consumer.
The Russia/Ukraine issue will slowly go away. Russia cannot afford any conflict with the Ukraine. Russia simply cannot survive long-term with the casualties it would take in any conflict with the Ukraine. Russia will continue to be a fly-in-the-ointment in all eastern border countries, but cannot afford economic sanctions nor the loss of life in a country that is already past the birthrate point of being able to replace its population (basically the entire Russian population is between 30 and 69 years old).
The China/Taiwan issue will be around forever, but China will not invade Taiwan. Taiwan can make China bleed, hard. China would have a long, painful war with Taiwan even without Japanese and American interference (which most certainly will happen if China decides to invade). China is playing a long-term game, but don’t kid yourself, Taiwan is definitely part of their long-term plans.
Democrats will lose both the House and Senate in 2022 (Republicans pick up 45 House seats and 3 Senate).
Bitcoin’s volatility will continue, making many investors weary. Bitcoin closes 2022 at $55,000 (currently at $42,000).
COVID will end (in America). Not go away, this bug is here forever. However, COVID will be rolled into the normal cold and flu season and lock-downs will become a thing of the past. The rest of the world will continue to struggle with how to manage COVID. The USA will lead the world (finally) into the sunshine and out of this dystopian nightmare.