As 2022 draws to a close, I wanted to spend some time reflecting on some of the big themes.
Then, as I’ll cover tomorrow, I want to discuss what I think investors should be looking out for next.
So, let’s dive right into our first topic: inflation and interest rates…
It is staggering just how much investors and markets have been hanging onto every word of central bankers this year. With inflation running rampant and monetary policy playing catch-up, everyone has watched on as the Fed, RBA, ECB, and most major central banks raised rates at a historic pace.
As I’ve discussed numerous times this year, the transition from one extreme during the pandemic (QE) to the other extreme in the wake of soaring prices (QT) has been flabbergasting.
I think one quote from Jerome Powell back in July perfectly distils the lunacy of it all:
‘I think we now understand better how little we understand about inflation.’
The stupidity and ignorance of modern monetary policy were on display for all. And while the bankers claim they’re righting their wrongs, they may, in fact, be leading us toward further economic pain.
Conflict erupts
Of course, a big factor in the inflation and interest rate theme itself is the Russian invasion of Ukraine.
While the war seems to have levelled out somewhat, the direct conflict continues to influence global markets. Energy, in particular, thanks to sanctions on Russian oil and gas, quickly became a contentious issue.
Even now, with the worst seemingly behind us, it is hard to detail just how big of a structural shift we’ve seen from this one military move. And as Europe heads towards winter, the costs and consequences may begin to fully reveal themselves.
Despite being a world away, even Australians have felt the impact of this war. Our energy prices and policies are also evolving as the world ponders new and old energy solutions alike.
The silver lining for Aussie investors is that this has also delivered a huge commodities boom. Coal and gas stocks have easily been some of the biggest winners of 2022. Furthermore, while the enthusiasm has settled, they could continue to prosper well into 2023…
But the bigger long-term opportunity seems to lie in new energy solutions.
Whether it’s renewables, battery storage, or even nuclear fusion — governments are scrambling to implement new energy solutions. And while it may be years before we see any kind of payoff, the transition has really kicked off this year.
Crypto implodes
Following our contrasting theme for 2021/22, we simply can’t ignore the crypto market…
Roughly 13 months ago, in November 2021, Bitcoin [BTC] reached an all-time high of US$68,789.63!
It was the height of crypto fever, with FOMO spreading like wildfire across markets. Nearly everywhere you looked, someone was getting into or talking about getting into the blockchain in some way.
At least, it seemed like it…
Now, a little over a year later, it’s the complete opposite.
Investors have fled, scandals have dominated the headlines, and bashing bitcoin is back in fashion. Many are even back to declaring this ‘crypto winter’ as the final nail in the coffin.
Long-time followers will likely laugh at the irony.
It seems like the volatile, yet cyclical nature of bitcoin continues to mystify the mainstream.
Every time this asset class booms, it is often followed by a drawn-out trough. But, with each boom, the price and the technology grow stronger.
That’s why those in crypto for the long term shouldn’t be all that worried.
We’ve seen events like this before, and we’ll probably see them again.
It is just the nature of this emerging crypto industry.
Tune in tomorrow as we discuss what may be in store for bitcoin and more in 2023.
Until then…
Regards,
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Ryan Clarkson-Ledward,
Editor, Money Morning
Ryan is also co-editor of Exponential Stock Investor, a stock tipping newsletter that hunts down promising small-cap stocks. For information on how to subscribe and see what Ryan’s telling subscribers right now, click here.
