2022 Outlook Coming later this week
One major thought for 2022 is that stocks will generally be under pressure due to over-valuation. Added to this pressure will be the costs of transforming the economy following the pandemic plus the wholesale impact of uprooting the supply side monopoly wave that we have endured since 1982.
But for today, maybe just looking at the macro chart of the economy will give you a good picture of where we are now. This is an arithmetic based chart that combines all the major stock indexes, plus the 30-year, 10-year, and junk bonds, plus the gold and real estate ETF’s. It is just a kind of market money picture. At the moment the chart price it is resting on the 200-day average price area, an area where the market will make some decisions, hold or panic to lower levels. It the market panic start, I would look for the first level of support to be in the area of the green dashed line, about 8 percent down from here. The key issue for the market is inflation and the fact that the real interest rate, (10-year interest rate minus inflation is a – 5.2 %), there is a lot more work to do. Of course, speculative market players believe Fed Chair Powell will blink as this unfolds and stocks will go back to the highs. We will see.