18 Finance Monthly. Inve s tmen t 2022. The game is changing. One aspect I expect to change dramatically is “euphoric” market sentiment – the everything rally fuelled speculation to supercharged irrational levels. As a famous boxer never said: “I go into the fight prepared with a plan to get rich – which I stick with right up till I get punched hard in the face”. Sentiment, especially towards getrich tech scams, is changing. My tech valuation stupidity indicators – ARK, Bitcoin, Tesla - opened the year into negative numbers suggesting fundamental analysis is coming back into vogue. To be fair, Morgan Stanley disagrees with me on Tesla – predicting a rally to $1400 on the back of improving numbers and it’s already on the final lap of the EV marathon when everyone else is still tying their shoelaces… really? I predict everyone could be making decent EVs within a few years. But they won’t be… and to find out why, keep reading. I would never grace my market haverings with the legitimacy of being “predictions” but let’s run through some ideas for the coming year. Stocks Inflation is nailed on – which is perversely good for stocks on a relative basis. The upside will come from higher corporate dividends as the globe recovers from COVID. Sound stocks which will continue to beat risk-adjusted bond returns. But it will be a selective market – distributable profits matter as rates rise, spelling a crisis for the tech sector where unprofitable firms telling the pursuit of size over returns will struggle. In a rising rate environment, fundamental value stocks will outperform. I’m also expecting an ESG backlash to benefit the detest oil majors as energy shortages in Q1 trigger a fundamental review of climate change transition, and the acknowledgement we can’t dump gas overnight and expect the global economy to keep working. If we assume the global economy stages a covid recovery I’d expect a knew jerk Q1 market rally, before rising rates and lower liquidity sees a pretty flat second half. Consumers This is not going to be a good year for consumers - tax rises, massive increases in energy bills, inflation of food, accommodation, and “This is not going to be a good year for consumers - tax rises, massive increases in energy bills, inflation of food, accommodation, and modern necessities like Netflix will dramatically hit discretionary spending.”
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