2022, a year in review and future prognostications

We are rapidly approaching the end of 2022. I thought I’d spend a little time reviewing the predictions I had made at the beginning of the year and put forth what I see coming.

Here were my predictions:

1. Inflation will continue to run hot.

Inflation did run hot. The CPI was at 7.1% in December ‘21 and is now 7.1% as of November ‘22. It didn’t get as high as I had predicted (double digits). It peaked right around 9%. Even thought I didn’t get the exact percentage correct, I still count this as a win.

2. The S&P will return 14%.

Big fail on this one. Not only did the S&P not return 14%, it is looking to finished the year down around 20%. Ouch. I had based this prediction on the idea that the Fed was going to come to the rescue when the market stumbled. Boy was that wrong. My thoughts on this have gone 180 and I now see Powell attempted to end the Fed “put” for good.

3. Gold will gain 11% and breakthrough $2k per ounce.

Another miss on this one. Gold is going to finish the year right around where it started the year. We had a big swing higher in early March where it broke $2k/ounce but then went on a losing streak until it bottomed in early November.

4. Uranium stocks will have their best year in decades.

This was another miss. Uranium stocks looked set to take off. They had a great run up until April when the price of uranium peaked at $64.50/Lbs. They have since fallen back while the commodity priced sagged to $48.85/Lbs.

5. There will be a pivot from growth to value stocks.

I could this as a win. We’ve seen the darling growth stocks get hammered. While value hasn’t roared, it hasn’t lost 20% on the year either. The best take-away from this prediction is that, I need to be more specific on which growth/value stocks or etfs.

Final score; 2 out of 5. Not great but the only way to improve is to keep trying, so here goes…

Predictions for 2023

1. We’ve had one correction yes, but what about a second correction?

I’m specifically talking about the S&P500 here. The knee jerk reaction to higher rates this year is what brought us the first correction. Now I believe we’ll see a second leg down in 2023 when corporate earnings come in weaker than expected. Hold on to your hat because the market isn’t finished going lower.

2. Interest rates aren’t done going up.

At a minimum, Powell is going to raise at the next meeting. I actually believe he’ll raise at the next two before any kind of “pause”. This is when things will get real interesting because…

3. There is going to be a battle between the Treasury and the Fed.

The monstrous omnibus bill that passed in the waning moments of 2022 is a disgusting example of where our government is at in this day and age. These kinds of mega-bills were never the norm and they were never passed when a new Congress was about to be seated. At over 4k pages, this one is guaranteed to have plenty of nasty gotchas and handouts. The tough part for Powell is he will have to monetize this thing. In addition, the US government is going to have to roll over a lot of debt in 2023 and if Powell continues to raise interest rates, they will have to refinance at higher rates and this will put a constraints on future bills. At the same time, the Fed is losing money on their bond portfolio due to QT and will have to work with the Treasury to settle up their losses. This is going to shape up to be a battle. Whether it is televised or not will depend on which players think they have the most leverage.

4. There are going to be some tremendous deals on real estate.

We are seeing the beginnings of a serious correction in the real estate market. The increase in interest rates has caused many deals to fall through and sellers seem to be increasingly cutting prices. I’m not currently predicting an 07/08 style crash but I’m also not discounting the possibility. In 07/08, mortgage underwriters weren’t doing their due diligence and people began defaulting on their loans. Fraud became rampant. This isn’t the case this time around. Where we are seeing this is in…

5. The used car market is about to get really cheap.

The used car market looks borderline fraudulent. I’m seeing reports of 6-7+ year loans, second tier loans, and defaults/repos rising. This has all the markings of the housing market in 07/08. Grab the popcorn because fireworks are coming.

I’ve got a portfolio update coming as well as a few subscriber only posts that I’m working on. I’m thankful for this year, I hope it was a profitable one for you and here’s to 2023, may it be more bountiful than ‘22.