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2022 Predictions – Mid Year Check-In

2022 Predictions – Mid Year Check-In

July 20, 2022

We’re mid-way through 2022, can you believe it?  Depending on your perspective, that may be a good thing or a bad thing.  While we always strive to live in the present moment, it is important to review what we thought was going to happen, what did happen, and what we think will happen in the future.  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.
    • 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.
  • The S&P 500 will finish up 7% (5,140) on December 31, 2022.
    • 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.
  • The 10-year Treasury yield will be at 2.3% on December 31, 2022.
    • 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).
  • 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.  
    • Wrong, see above. Inflation rose so quickly that political interests could not stand in the way of the Fed.
  • 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.
    • We got this one right.
  • 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).
    • 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. 
  • 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. 
    • 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. 
  • Democrats will lose both the House and Senate in 2022 (Republicans pick up 45 House seats and 3 Senate).
    • 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.
  • Bitcoin’s volatility will continue, making many investors weary. Bitcoin closes 2022 at $55,000 (currently at $42,000).
    • 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.
  • 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. 
    • 100% correct, thank God.

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