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This Week Highlight - What To Lookout For in Y2022?
After a rough and volatile year in 2021, we have finally arrived at the January month of Y2022. With the crunching effect of Coronavirus and turning into Omicron now, the world is still wondering how many more folds of mutation will surface before the human reaches the end of this dark tunnel.
In Y2022, we foresee there could be more volatility in market and the global economics will face more shortage in liquidity after the pandemic stimuli end in April for both U.S. and Europe. Literally, here are few things we need to look out for this year in order to protect your investment monies safely:
1) Tapering Exercise - The U.S. FED policymakers have made known openly many times in Q4 2021 on their intention to shave the balance sheet of USD8.3 Trillion from Government's budget deficit. This will be done in Y2022 but yet to mention the dates. In our opinion, there will be most probably 2 rate hikes this year in order to trigger a tapering program. Though some traders expect 3 rate hikes, we think one in the first semester and the other in second semester will be "disastrous" enough to rock the global markets!
Hence, pay attention to the rate tightening most likely in April/May and Oct /November seasons. These actions will follow the corporate earnings of huge companies in U.S. and European markets.
2) Weakening Dollar - While the U.S. Government is planning to repatriate the fund to U.S. soil through the tapering exercises, we all know that the U.S. is facing a challenge of fund shortage in paying Government bills. On one hand, they want to increase rates to control inflation and money back to the U.S. banks, the other side will continue to print Dollar for supporting sovereign policies like infrastructure building, financial bonus to covid families, tax incentives etc.
When Dollar tanks, lookout for Gold prices to surge and this will influence Silver and commercial metals. Construction companies will need to adjust their risk margins for undertaking new projects. Farmgate prices for food will follow suit and cause stagflation when salaries cannot keep the pace of rapid rising prices.
3) OPEC+ countries have been discussing to increase global supplies by 400,000 barrels on daily basis from February onwards. Even this plan might commence, it will have little downside effect on Crude due to shrinking shipment on global basis and shortage of energies from post effect of pandemic crisis. In line with weaker Dollar and the flamboyant nature of OPEC leaders, they may reverse the policy in mid-year and continue to push the Crude prices to above USD90 /barrel.
In summary, this year will be subject to some major market factors stated above and that could trigger a series of risk factors if Omicron mutates into another new wave. As long as the global travelling is still on limitation, every country in the world will be facing shrinking in economic growth and reducing GDP.
Stay alert to watch the market. There could be some inverse opportunities for you soon!
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Markets are off to a rough start in 2022. The $S&P 500 index(.SPX.US)$ ended the week with a loss of 1.9%, while the $Dow Jones Industrial Average(.DJI.US)$ has lost 0.3%. The tech-heavy $Nasdaq Composite Index(.IXIC.US)$ fell 4.5%, its worst week since February. And the turbulence hasn't been limited to the stock market: The yield on the 10-year Treasury note jumped for five consecutive sessions to its highest level since January 2020, before the pandemic started spreading aggressively through the U.S. The week has been marked by big swings across stock and bond markets as investors have fled some of the most popular trades of the past year and parsed signals from the Federal Reserve on the path of rate hikes. As bond prices have fallen and Treasury yields have jumped, investors have ditched shares of technology and growth companies, particularly some of the most speculative bets in those sectors. The S&P 500 kicked off the new year with a fresh record on Monday bu
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