Last week saw a succession of fundamental shifts in how the global economy is working: inflation, China’s reopening, western politics, crypto, Climate Change, Tech stocks, and in Ukraine. These all have significant potential market implications.
We’re officially in a bear market, but markets are still massively overvalued. The laws of Mean Reversion are immutable – some stocks are going lower. Inflation, Bond Markets and Confidence are all flashing danger signals.
Yesterday’s ongoing pain in crashing financial asset markets demonstrates the need to diversify portfolios and decorrelated returns. Shipping is one such asset; returns have been boosted by scarcity as a result of the pandemic – the question is: can these returns be maintained?
Markets look distinctly soft, and vulnerable to further downside pressure. The gaps between value, hype and narrative are becoming clearer – spelling opportunity, but also raising the risk of a crash.
Yesterday’s market meltdown was heralded as a “capitulation trade”, but who knows? What we do know is there an awful lot to worry about, and the conditions for the BIG ONE have been building for decades. Time to re-read The Great Crash, 1929.
Markets are being whipsawed by rate hike threats from Central Banks, China lockdowns, the Ukraine war, while being stalked by inflation and stagflation. The big risk remains policy mistakes – trying to solve these with the wrong monetary and fiscal policies.
I’d like to introduce you to my latest theory on markets: the D-Jay Wave, a 35-year recurring cycle of irrational market exuberance. I have carefully and diligently researched this over a couple of pints.. It’s therefore better underpinned than most SPACs or Disruptive Tech funds. (Glossy pitchdeck not available.)
After yesterday’s dramatic market roller-coaster, traders are wondering if it’s a buy-the-dip moment. They probably will. But the narrative has reversed. The improbable tech stocks into substantial correction territory have a considerable way still to fall if history is any guide.
Occasionally the Morning Porridge strikes a lucky insight on markets – this morning here are some thoughts on how 2022 markets and events may or may not develop. If they occur I shall hail myself an investment genius. If not, can we quietly forget them?
“The future may dimly be perceived through the veil of the past”, sounds like bad poetry, but has a point. The confusions and conflabulations that characterised 2021 will likely set the tone for what’s coming – what were the key themes of 2021? Best to understand them before trying to fathom what comes next.
