|
Monday 3rd January 2022
Hi Friend,
TSE Monday Morning Markets ...
|
| | The Saturday Economist Monday Morning Markets ... Year in Review
This is our Monday Morning Markets Update for the 3rd of January 2022. I thought it would be a good idea to look back at 2021 and review the performance of the markets over the past year. It's a good discipline to review and evaluate the year past, as we formulate our forecast scenarios for the year ahead.
Top line, "Cash is Trash, (Jamie Dimon), Bonds are Garbage ( Bill Gross), Equities Are Overvalued (Everyman), Bitcoin is worthless (Jamie Dimon), Most NFTs are junk (John Hargrave)" ... When it comes to understanding market moves, "Any explanation is better than none" (Nietzsche). Be careful out there ...
|
| | Markets up 14.4% ... "Easy Money" in 2021 ...
Our global equity index basket closed up 14.4% in the year. U.S. markets dominated up by almost 23%. S&P top of the American trio up by 27%.
European markets were up by 20%, the French Bourse the star performer up by 29%. FTSE the laggard up by just 14%. In Asia, Nikkei and Shanghai posted 5% gains. The volatile Hang Seng was down by 14%. The Indian BSE posed a 22% rise.
Easy money over the past year, will be more difficult to find in the year ahead. Markets will adjust to rising base rates and bond yields. In late December, it appeared markets were looking for a reset. FOMO v FOBIA. "Fear of Missing Out", yielding to "Fear of Being In Alone". It will make for a cautious approach to equity allocation.
Talk of a FTSE 8,000 may be a demanding gain. Lots of overhead resistance at 7,750 may be the limit for a 5% rally. The average S&P target for the end of the year is 5,000. That's a modest 5% gain on the December close. U.S. nominal growth is likely to be over 8% this year. 5,000 not such a big call. But then remember, that's a 25% over valuation on our merit scale.
|
| | Bond Market Sentinel ... US Ten Year Yield 1.51 ...
US ten year bond yields closed up 59 basis points in the year to close a 1.51. Tapering set to terminate in March this year. We expect bond yields to test the 2.50 level 'ere too long. The inherent capital loss a modest 40%, buyers beware, as base rates rise.
UK ten year gilts closed up 76 basis points to close at 0.96. We expect ten year gilt rates to hit 1.50 midway through the year.
In Japan and Europe rates were up slightly. Composite rates still negative in Europe but not for long. First the test of 1.80 in the U.S. and 1.25 in the UK?
|
| | Exchange Rates ... Sterling down to $1.35 ...
Sterling closed down against the dollar at $1.35 from $1.36 but up against the Euro at €1.19 from €1.11. The Euro was under pressure against the Dollar down to $1.14 from $1.23.
It was all about Euro weakness in the year, as ten year bond yields opened with a 149 point spread. In the US. bond yields are rising, the Fed is set to raise rates three times this year.
Much of the drama is already in the market. We expect Sterling to average £1.35 through the year, testing the £1.38 level in the process. Against the Euro we model €1.18 with a slight uplift in the Euro Dollar rate to $1.15.
|
| | Empires of the Cloud up 37.6% in 2021 ...
Our Empires of the Cloud Fund was up almost 38% in the year. The gain since our 2016 call, is 425%. Google the best performer up 68%.
Amazon, the laggard up just 4%.
Our valuation index suggests a 20% over reach. A combined market cap of $10.1 trillion and an average PE of 37.0 suggests a period of consolidation should follow at best.
Analysts remain bullish on the empires of the cloud fund. Developments in AI, virtual reality and the Metaverse, bode well for the quins. The bulls anticipate a 15% gain for the fund over the next twelve months. Super bulls foresee a 30% gain. The bears anticipate a modest 5% worst case draw-down. What's not to like?
|
| | Dynasties in the Cloud down -36.3%
In China we track, our "Dynasties of the Cloud" fund. We follow the fortunes of Alibaba, Baidu, Tencent, Weibo and Xiaomi. It has been a challenging year, dominated by central government regulatory clampdown and investment restrictions.
The Dynasties in the cloud fund was down by 36% in the year. Losses were heavy across the five. Alibaba the worst performer down 48%. Tencent escaping with a 20% loss.
Analysts consider the fund to be oversold by the end of 2021. Gains in the year ahead are expected to out perform with little downside. 12% the low level gain, almost 50% gain the average expectation. The medium term upside is over 80%. Weibo the most exciting in the pack.
|
| | Crypto Wallet up 17% in the year ... Our Crypto Wallet was up 17% in the year. Dogecoin the dummy down over 40%. Ethereum the best in class up 64%. Ripple and Litecoin up 24% and 10% respectively.
It was a volatile year for Bitcoin. Bears tested the $30,000 level in January and July. Big Apes pushed to new highs of $67,500 in November.
We mark the close of year at just under $47,000 for a 29% gain in twelve months. The lift off from $10,000 was made in August 2020. Volatility with big moves. The wallet is a trader's dream pack. Always the potential for an investor's nightmare.
|
| | Oil Brent Crude higher ... $74.83 ...
Oil
prices Brent Crude closed up at $74.83 last week. That's a near 50% gain in the year from an opening position of $50.37.
$75.00 to $80.00 may be the range over the first quarter. The EIA forecast of $72 dollar oil through 2022, doesn't look quite so optimistic but $75 Brent Crude through 2022 is our benchmark call. The inflation impact, year on year comparison, fades into the third quarter of the year.
|
| | That's all for this week's Monday Morning Markets Annual Review, have a great year ahead. We will update our Friday Forward Guidance later in the week. We review our forecasts for 2022 in this week's Saturday Economist.
John
Friday Forward Guidance, The Saturday Economist, Monday Morning Markets. Forward to a Friend or Colleague. They can sign up for updates here.
Download the PDF Monday Morning Markets Annual Update Here
|
| |
© 2022 John Ashcroft, Economics, Strategy and Financial Markets, experience worth sharing.
______________________________________________________________________________________________________________
The material is based upon information which we consider to be reliable but we do not represent that it is accurate or complete and it should not be relied upon as such. We accept no liability for errors, or omissions of opinion or fact. In particular, no reliance should be placed on the comments on trends in financial markets. The receipt of this email should not be construed as the giving of advice relating to finance or investment.
______________________________________________________________________________________________________________
If you do not wish to receive any further Saturday Economist updates, you can unsubscribe or update your details, using the buttons below or drop me an email at jkaonline@me.com. If you enjoy the content, why not forward to a friend, they can sign up here ...
_______________________________________________________________________________________
We have updated our privacy policy to address Europe's General Data Protection Regulation (GDPR). The policy changes include explaining in more detail how we use your information, including your choices, rights, and controls. We have published a GDPR compliance page about the regulation and the steps we have taken as part of our compliance process. Your privacy is important to us.
For details of our Privacy Policy and our Terms and Conditions check out our main web site. John Ashcroft and Company.com
_______________________________________________________________________________________________________________
Copyright © 2022 The Saturday Economist, All rights reserved. You are receiving this email as a member of the Saturday Economist Mailing List or the Dimensions of Strategy List. You may have joined the list from Linkedin, Facebook, Google+ or one of the related web sites. You may have attended one of our economics presentations. Our mailing address is: The Saturday Economist, Centurion House, 129 Deansgate, Manchester, M3 3WR United Kingdom.
|
| |
|
|
