INSIGHTS

Hard landing?

One of the ways central banks break the ice to markets is via their research. While said research is not the official opinion of any Central Bank, it is nevertheless an outcome that is likely.

Apple is by far the most widely held stock in the world. Either directly or indirectly (via ETFs and Funds), almost all fund managers have some exposure to Apple in their portfolios.

As expected, and as economists expected, the Fed raised rates by 50 basis points and announced policy pertaining to QT (quantitative tightening). The wording from Chairman Powell suggests that there are at least 1-2 more 50 basis point hikes ahead, and then a slowing down of tightening policy.

No place to hide

Analysts, pundits, and Central Bankers are mostly right when it comes to economic issues, growth, and inflation. However, their models do not include a pandemic or war. As such, most estimates and projections during the past several months may be treated with skepticism.

Just 1 week into 2022 and something interesting is happening. The rotation we have been witnessing for some time now has accelerated. While financial sites report a rotation from growth to value, I see it as an exodos from ultra-high valuation stocks to something else.

2022 forecast

As we ended 2021, the talk of the town was inflation. While Central Banks, especially in the US, think inflation will eventually come down, the new language in “Fed-speak” does not encompass the term “transitory” anymore. The Fed is now a headwind for markets.

One of the main characteristics of the current investment environment is the extreme concentration of a meg-cap stocks in ETFs and funds as a result of ETF investing.

If one looks at consumer sentiment vs the major US indices over a very long period of time, they will notice that they are correlated. That is until recently. The chart below depicts divergence unlike anything we have seen before.

The chart below comes to us from the IMF. In short, it is depicting the supply chain turmoil around the world and how it is impacting delivery times. A reading above 50 indicates faster delivery times and a reading below 50, slower delivery times.

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