Broker Check
2022 Predictions – End of Year Check-In

2022 Predictions – End of Year Check-In

January 10, 2023
Share |

2022 Predictions – End of Year Check-In

2022 is in the books!  We thought the COVID years were an anomaly of strangeness, however we may just be living in an era of weird.  So here we go, a review of where we were wrong, where we were right, and some nuance to what has happened this year:

  • The stock markets will experience at least one 10% drawdown in 2022.
    • Mid-Year Observation - Whelp, we were right on this one. With fears of recession looming, too much stimulus sloshing around in the system exacerbating inflation, and rumors of war (see below) – the markets are re-valuing stocks.
    • End of Year Observation – Correct - The S&P 500 finished down 19.44% for the year.

 

  • The S&P 500 will finish up 7% (5,140) on December 31, 2022.
    • Mid-Year Observation - Obviously too early to tell, so we’ll call this a draw. However it is not looking likely that the markets will be up +20% from where they sit today.
    • End of Year Observation – Wrong, see above. The Fed acted too slowly to start raising interest rates causing market volatility.  An earlier acceptance of long term inflation followed by smaller rate increases over a longer period of time would have allowed the markets to absorb the hikes.

 

  • The 10-year Treasury yield will be at 2.3% on December 31, 2022.
    • Mid-Year Observation - Although there is still time, we are calling this a miss. Inflation is way higher than most expected and the Fed is on a rate-hike tear (and probably should be even more aggressive).
    • End of Year Observation – Wrong - The 10-year yield closed the year at 3.7%. We were way off.  The Fed calling inflation “transitory” for most of 2021 led us to believe they would continue this story for most of 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.   
    • Mid-Year Observation - Wrong, see above. Inflation rose so quickly that political interests could not stand in the way of the Fed.
    • End of Year Observation – Wrong, but kind of a split - The Fed raised interest rates 7 times in 2022 taking the Funds Rate from 0.25% to 4.5%!

 

  • 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.
    • Mid-Year Observation - We got this one right.
    • End of Year Observation – Correct - They definitely dropped the “transitory” label!

 

  • 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).
    • Mid-Year Observation - Wow, could not have been more wrong on this, but our reasoning was valid. This has turned into a quagmire that is going to last a long time and soon Mr. Putin is going to have to call on Russia’s youth to participate in a war against its own people. 
    • End of Year Observation – Wrong - This is not going to go well for Mr. Putin or Russia.

 

  • 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. 
    • Mid-Year Observation - With half the year left, this situation could change. However, we’re calling this as a correct prediction.  Initially with the Russian invasion in Ukraine, we were concerned that China would take advantage of the chaos and move towards Taiwan.  Now that China has seen what Russia is going through, we think it even more unlikely that China makes a move. 
    • End of Year Observation – Correct - There has been a rattling of sabres, but with zero Covid policies no longer state policy, a shrinking demographic, and a strong Tiawan that is an island nation – China has wisely stayed away.

 

  • Democrats will lose both the House and Senate in 2022 (Republicans pick up 45 House seats and 3 Senate).
    • Mid-Year Observation - The Senate will be close, but the House is a done deal. We’re calling this one as correct and we’ll see how many seats are actually gained.
    • End of Year Observation – Split - One of the more puzzling outcomes of the year. President Biden is largely unpopular, however it appears that an association with Donald Trump is even more toxic.  Unqualified, Trump backed, candidates caused the Republicans to lose one Senate seat and only gain 9 seats in the House.

 

  • Bitcoin’s volatility will continue, making many investors weary. Bitcoin closes 2022 at $55,000 (currently at $42,000).
    • Mid-Year Observation - Mixed bag here but were saying this is correct (certainly on the volatility side). Bitcoin would have to double from its current price to get to $55,000, but we’ve seen that before and the general investor is definitely losing interest in Bitcoin.
    • End of Year Observation – Split - We were way off on the closing price (around $16,500 at the end of year) but way on regarding volatility. Rapidly rising inflation and Fed hikes started the run on Bitcoin, FTX and Sam Bankman-Fried finished it.

 

  • 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 lockdowns 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. 
    • Mid-Year Observation - 100% correct, thank God.
    • End of Year Observation – Correct - Heck, even China has reversed course (watch China, this is not going to be pretty).

 

Mid-Year Score - We will check back in on these at the end of the year, but currently the scoresheet leaves us with:

  • 6 correct predictions
  • 1 draw (likely to be moved to a miss)
  • 3 misses

 

End of Year Final Score – Like a sword fight with Monty Python’s Black Knight, “We’ll call it a draw.”

  • 4 correct predictions
  • 2 draws
  • 4 misses