Weekend update; Market observations and price predictions for 2022 and beyond

Equity markets

-Capitulation of the short-term downtrend?

A green hammer candle on the weekly indicates a follow through to start the week. If the spoos retake the 50-week sma, we could see a stabilization of the markets
Green hammer candles on the major averages indicate an exhaustion of the short-term down trend

-Based on the chart and market action, the Russian invasion of Ukraine was priced in for the most part.
-Unless there are other unexpected developments, I see a short-term stabilization of the major stock averages.
-Now that the Beijing Winter Olympics have concluded, we must never discount the increased likelihood of Chinese incursions. I believe that this factor is not yet priced into the markets, but this will have a much more profound impact on the stock averages than the Russian/Ukrainian conflagration.
-A resumption in the weekly downtrend could resume if the world is confronted with more unforseen military circumstances
-My prediction for 2022; the S&P 500 will break above 5,000 sometime between now and the end of the year. Very likely, we could see a touch above 5,200. This would translate into a 18.5% rise in the S&P from current levels to 5,200.
-The amount of money in the financial shell is too great to stop this freight train, and the reasons why price inflation and housing and rent growth are so strong provide the same catalysts for higher stock prices over the intermediate term. None of these markets are mutually exclusive of one another anymore.

Geopolitical events, bond yields, and the central bank softening

10-year UST; Bonds could get hit some more if yields rise to the next levels of resistance; 2.20% and 2.40%, but the expectations of GDP falloff could lend bonds some support. On the other hand, a bull flag (bear flag for prices) on the weekly is forming. I place the odds of reaching these resistance levels at 60% for the lower (2.20%) and 50% for the higher (2.40%).

-I find the timing of these military actions peculiar, as they are auspiciously timed to benefit the Western governments and their central banks. NATO is an outdated relic of the cold war, yet both sides are using it (Russia, especially) as a reason for their sudden recalcitrant militarism. The U.S. was never truly intent on having Ukraine join NATO, but this allowed Russia the excuse to invade Ukraine.
-Regardless of price pressures, this sudden geopolitical tension translates into a more dovish trajectory for the Fed over the intermediate term.
-We notice how GDP growth predictions are falling, and thus, the upcoming tightening campaign would put GDP measures in great peril.

-My prediction for 2022; Softer monetary policy will prevail regardless of inflationary outcomes, while fading GDP growth and geopolitical “problems” will increasingly concern the monetary authorities. Bond yields will not rise to levels much higher than the two levels of resistance I listed above, and should provide a ceiling.

-Currency collapses usually result from persistently large budget or balance of payments deficits when compared to national GDP. This was the reason for the Soviet Union’s collapse. Our concerns last year regarding the ballooning US deficits were assuaged as the recent multi-trillion dollar spending initiatives were curtailed.
-For 2020, the federal budget deficit as a % of GDP was 15%. For 2021, the level was 12%. For 2022 and 2023 they are estimated to drop to 7.7% and 5.2%. While still historically high, they buy the system some more time.
-This has helped bond yields to remain at these relatively lower bound levels.
-My prediction for 2022; I suspect real yields will remain low throughout the year. Given the recent lower spending levels of the USG, the Fed is still very dovish and will remain so indefinitely; even if price inflation remains stubbornly high.
-QE is deflationary by function, so eventually price growth should abate. This includes rent rate growth.
-With the amount of money in the financial shell, the amount of leverageable collateral will prove auspicious to perpetuate the higher sovereign deficit spending… and higher asset prices.

Housing and rental markets; Income generating asset prices will continue rising

-There is a “tag-team” between central bank QE and asset price levels. Both act as catalysts to keep bond yields low. When the Fed and other central banks pull back on QE and its sister programs, the higher asset prices that resulted from QE in the first place can then be counted on to do the heavy lifting. If asset prices fall, the Fed will have to goose them with QE, so the nation-state deficit spending can continue.
-My predictions for 2022; though I anticipate the rate of rent and house price growth to fall off after the Spring selling season, prices and rents will still continue rising, but their second derivative will decline.
-Home sales will continue to fall as this has become a permanent feature of the real estate market. House price multiples to household income will climb over time and the larger transaction cost burdens will de-incentivise homeowners from selling and moving.
-I estimate that it costs at least 10% to sell a house and rebuy one at the same price. Thus, it costs about $50,000 to sell and rebuy another $500,000 house, and this does not include potential capital gains taxes. Broker commissions, title costs and insurance, local transfer and recordation taxes, and mortgage costs amount to about 10%. Moving costs and the aggravation involved at looking for another property are just more added burdens.
-Large institutional money pools are buying as much housing according to a set of algorithms as possible, and I assume this will be a permanent feature of the marketplace. This trend has only intensified since 2012, so why will it stop?

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29 thoughts on “Weekend update; Market observations and price predictions for 2022 and beyond

  1. Chris,
    Will all these new sanctions against Russia blocking trade be another nail in the coffin for the world economy? These sanctions would mean less trade going on and less economic activity. Could this be another avenue to crash the world economy? If that is the case this could be another avenue for the Fed to NOT tighten monetary policy and maybe even turn on the spigots. Either way, I see more inflation as supplies from Russia are cut off and the Central banks releasing more money. Maybe this could be stagflation.

    1. If I’m Russia and I’m getting blocked from using SWIFT, wouldn’t I develop an alternative? I notice that China and Russian central banks have been stocking up on gold for a decade while Canada liquidated theirs. Looks like a global shifting of wealth from the west to the east and they are now getting close to pulling the final trigger. But they need a narrative for the plebs and the history books! Faking a nuke / ww3.

      I notice that the spx hasn’t broken out of it’s downward trend since Jan 18th as Chris called it. People aren’t ready for war yet I don’t think. Still need more propaganda to get that fear going.

      I notice the resistance on the us10y bond yields from Oct-Dec 2019 was 2%, couldn’t break to the upside, then took a nice dive down to zero with the introduction of the Covid narrative. That’s the level that started to upset the market preceding this war narrative. Now I notice it dropping off a cliff. But there is room for it to come down to the trend line support, and slowly trend up toward that 2% yield before the end of the year.

      I expect the war narrative to develop as it needs to in order to run cover for new lows on the spx.. but they can drag it out over the course of this year if they keep bond yields in check, which they seem to be making an effort to do.

  2. One important lesson to learn from Russia’s invasion of Ukraine is GET A GUN. Ukraine has loose gun laws where most people can get semi auto guns or shotguns. The invading russian soldiers are being stymied because Ukrainians own guns and are willing to fight the russians. If you live in a place where you are not allowed to own a gun or the government makes it very difficult to own a gun(such as blue states like CA, NY, NJ, and Massachusetts) then GET OUT of those places. Do not count on those governments to defend you when an invasion happens. People who do not have guns when their area gets invaded are totally helpless. Any government that makes it extremely difficult or forbids its citizens to own guns is an enemy government working against its citizens.

    If the USA ever gets invaded then the Northeast states and all the west coast states will be toast as those states make it hard for residents to own guns. Most of the Northeast USA coast and West Coast USA residents will most likely run instead of fighting the invaders.

    1. Being stymied? LOL you watch FOX and CNN all day right?

      Very little fighting against Russians….Russians aren’t even leveling the place as they want to keep it intact.

      More braindead American nonsense….yeah get a gun if you live in American large cities which are more dangerous than war zones.

      Clown

  3. Zillow earlier this year mentioned house prices rising 16%. Do you think they will rise that much?

    1. I thought about 10%, including the gains already from the past two months. But if the balance sheets are expanded and yields fall off, we could see something close to what Zillow says.

      Inflation will continue to rip if the Fed and ECB turn dovish again.

      What timing with the war, eh?

  4. The war in Ukraine is a convenient distraction instigated by the top elite running this planet to divert attention away from several problems:
    1) The Covid 19 narrative and the associated Vaccine mandates have fallen flat on its face. Notice how there is no more talk about Covid or the Trucker Convoys. Suddenly the Covid mandates are being loosened up.

    2) The Biden pre tendency needs a convenient distraction from its incompetence and unpopularity.

    3) The elite also need a convenient distraction from rampant inflation and stagnant economic growth. Without this distraction people may wake up and discover that the top 1% are getting wealthier while the bottom 90% are getting poorer.

    4) The other major problem is an increasing number people are starting to get sick due to these Covid 19 kill shots. The elite need to divert attention away from normally healthy people suddenly getting sick and dying after getting their vaccinations.

    When enough people get restless against their governments a major war conveniently starts somewhere. World War I started when workers suddenly realized they were underpaid while the captains of industry were getting super wealthy off their backs.

    World War II started in the midst of an economic depression and high unemployment.

    I believe Putin also could use a distraction from Russia’s problems at home , otherwise, he would not have invaded Ukraine. Putin is aiming to be the next Hitler and looking for a power grab. However, Putin misjudged the Ukraine peoples willingness to fight for their country.

    This war has started to divert attention away from the synagogue of satans crimes that also include Putin. Remember that Putin is also part of this crime syndicate like Trump, Biden, and Harris.

    Just remember that God is ultimately in control and is allowing this to happen so the evil ones can fight each other and destroy themselves as a result. God also allows these things to happen because humanity chose to allow wars to happen. Unlike Satan, God does not intervene in people’s choices. God gives guidance as to the best course of action for those that ask but does not force humans to take a particular course of action.

    1. The ruble is now trading at historic lows against the dollar and euro. The Central Bank of Russia must address Russia’s ongoing inflationary problems. Russia’s official inflation is already close to 9%, and its government lies to its citizens even more than that of the US. The people there are not happy about this.

      The prices of groceries and other living costs are already exorbitant for Russia’s residents. Just watch the YouTube videos of Russia’s residents. Add to their stunningly high costs of housing in the local currency, and we have a nation that is economically and financially much worse off than any Western nation. Don’t blame the West either; Russia’s fundamental problems were generated from within its borders.

  5. Thank, Chris. This stuff all makes sense.

    One question… What do you think stocks would do if China CCP is invades Taiwan?

    1. The spoos could touch the 100-week sma. But that would work itself out and would provide the upward thrust needed for the indexes to resume their upward march to all-time highs. Think about balance sheet expansion helping, too.

  6. For all you Putin lovers out there; the Russian citizens are taking a financial bath that is much worse than the one the citizens in the West are taking.

    The ruble is now trading at historic lows against the dollar and euro. The market expects more action from the central bank, which has to address inflationary risks. The weakening in the rouble after the invasion of Ukraine is expected to dent living standards in Russia and to stoke inflation that is already close to 9%.

    The central bank may now carry out an unplanned interest rate hike as it did in late 2014, when it raised the key rate to 17% from 10.5% late at night amid a plummeting rouble.

    We can only blame the West so much. The fundamental problems of the Russian ruble and the Russian monetary system rests with Russia and Russia alone; not the West. The corruption in the Russian business world is on a level that is unseen in the West.

    1. Hi Chris,
      Considering the Russian stock exchange has dropped so much recently would it be worth investing in it via something like the RSX – VanEck Vectors Russia ETF? They are obviously big exporters of raw materials etc and surely would bounce back, what are your thoughts?

      1. Considering its direct exposure to the ruble, it’s like catching a falling knife. It is tempting, but the currency risk is off the charts.

        With that said, how much lower will the ruble drop vs the USD? It has to bottom somewhere. Maybe nibble a little and hope that Russia doesn’t go full scale invasion.

      2. Russia is on sale this week! Do they delist all stocks Russia? Seems like they want to prevent losses, not cause more losses. And since we know how fake this entire Ukraine charade is…
        will those rooski stocks eventually uptick….

        The odds are?

      3. A new “Iron Curtain” is being set up as part of WEF “multi-polar” world. We don’t know yet what the final rules are going to be for transacting through that wall. I wouldn’t rush to add any assets residing behind the wall (assuming one is not residing in Russia).

        1. I agree with your assessment. it is basically one huge gamble. Interesting take, and this would sound on par with the tripolar world of Orwell’s 1984. I could see sanctions wiping out holdings. Russia seems intent on fighting and if we know the outcome correctly, Russia will continue around the central Asia nations of the former Soviet Union in its build up to WWIII

  7. This is an interesting article from the New York Post.

    Putin played Powell — and US pays the price

    https://nypost.com/2022/02/26/putin-played-powell-and-us-pays-the-price/

    The only thing I would change regarding the premise is that the Federal Reserve knew exactly what it was doing and was under orders to create this inflation. There’s no way that these Fed managers with their high intellectual capacities could be so willfully ignorant with regards to the inflationary ramifications of their monetary policy.

    This was done by design to catch the United States at a vulnerable moment in which it would be unable to aid other countries, as Russia and soon to be Chicomm China invaded them in preparation for World War III.

    The FED is going to raise interest rates only a token amount and inflation is going to rage until mid decade. I won’t even know if I can keep up with the rent rate increases fast enough.

    I hope all you social justice warriors out there enjoy the country you’ve created for yourselves. This is the result, and they are not mutually exclusive. The quest for all of these social justice objectives were first tried in the Soviet Union, and look what happened to that. There’s no strong glue or cohesion within the population to stand against this monolithic adversary anymore. It’s all done. You all crying the blues about social injustices are just going to have to take it like the socially re-engineered debt slaves you are.

  8. The reason why the average person is easily duped and fleeced is because they cannot believe how evil some people can actually be. Most people believe that others are like they are.

    There are a few of us who know otherwise. You and I know the coordinated evil that walks this planet.

    Think about this. If I were a psychopath with a genius-level IQ what do you think I would do? First of all, I wouldn’t do what the average psychopath does. Psychopaths with low to average IQs are the ones we see in prison. They were unable to harness their satanic trait properly. They ended up killing people, raping women, stealing, and selling drugs. Low-level psychopaths are the ones we often hear about on TV and in the newspapers as such.

    Sociopaths and Psychopaths with high IQs (e.g. 135 and higher) are the ones we often hear about in the newspapers as well, but for other reasons. They are the large hedge fund managers and investment bankers. They rise up the corporate hierarchies to become the C-level officers. They run for office and become your favorite politician. They rise up the levers of power in the political spheres. They may become a doctor or a lawyer and can gain control over others. They may strive to become a judge and wear a robe.

    If I was a Jesus hating psychopath with a high IQ, I would become a cardinal or bishop and exert influence over the flocks. I would strive to become the Pope. I would learn the Bible through and through and rise up the levers of power within the church hierarchies to become a mega church pastor. Once established into an area of influence in the Christian church I would preach a false gospel and send countless souls to hell. I would take great pleasure in it. That’s some of the things I would contemplate doing if I were a sociopath or psychopath with a high IQ.

    The problem is that the simple of this planet have no idea what they are up against, and the less moral that the vast majority of humanity becomes the more easily they are swayed by the psychopath. That’s why the world is in this condition.

      1. Another sheenie pastor working the rubes. Got a blonde wife. They love blonde white women.

    1. I remember an anectodal story about when Henry the VIII started the protestant revolt in England. There was a rebellion against him in the north which would have swept him and his forces away called the pilgrimage of Grace. But the local clergy dissuaded the masses from taking up arms. Henry the VIII consolidated his power and put them down brutally. That would turn out to be the last chance England had to save itself from Protestantism. People had no idea what they were dealing with.

    2. You nailed it, Chris. People do not know about psychopaths. They don’t want to believe it.
      Psychopaths have no empathy. That’s why they can fleece people and lie to them. They don’t care.
      They study people, experts at predicting behaviour and plot their strategies accordingly. Charming, beguiling, they draw you in, spin a story of half truths and hook you. A future fake. Two weeks to flatten the curve, folks.

      1. I think of our favorite athletes and entertainers. I think of many of the famous actors and actresses who seek fame. I think of the people who have websites who mock and malign other people and take great pleasure. I think of influencers who get millions of subscribers. Certainly, not all of them are what we would consider sociopathic, but a larger percentage of them are versus the general population.

  9. the question I have – if bodies pile up – what impact does that have on the housing market ? I am thinking that the numbers might be staggering over the next 3 to 5 years.

    1. You bring up a great question regarding housing. To me, this is the one hanging chad that presents us with a secular bear case. I view this potential to be the one existential threat to the housing market.

      I understand why you ask this question. My logic presents us with a non-sequitur. On one hand I say how there is not enough housing and inflation and rents provide support. Yet on the other hand, I fear that many people will die and that these reduced population numbers will cause an extra supply of housing.

      So far, monetary policy is winning out. I honestly don’t have the answer. I do contemplate it though, continually.

  10. The word “conspiracy” is mentioned 10 times in the KJV.

    The word “conspire” in its present and other tenses is mentioned 19 times in the KJV.

    True Christian remnant know all about the concept of the conspiracy. People conspire all the time. Anyone who doesn’t believe in conspiracies deserves to be fleeced and I have no sympathy for them. The stupid always get exploited.

    Proverbs 22:3 KJV
    A prudent man foreseeth the evil, and hideth himself: but the simple pass on, and are punished.

  11. CSV and SCI are cheaper than a couple months ago. These two funeral service companies are experiencing some stellar earnings growth post vaccine mandates. The people are dying from causes that have nothing to do with Covid, and the business is booming. Funeral service company investors should rejoice that billions bought the covid lie and got jabbed. I would be nibbling here. The bodies of the young folk are piling up. They believed the lie, and now they die.

    1. I know all sorts of people who are getting tested for omicron if they get the sniffles. They speak of “isolating” as if it’s the vacation of a lifetime. The seem to look forward to it, almost as if it’s a rite of passage into a new paradise.
      Jacques Attali’s prediction that the idiots will go to the slaughterhouse on their own seems more accurate every day.

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