So much has happened since the start of 2022 that it’s time for a mid-year prediction and recap post:
1. The Ukraine situation will suddenly and seemingly inexplicably resolve, although I don’t know what that entails or how it will transpire. But it will not be nuclear war, world war, or anything like that. It will just come to some resolution and the media will stop giving it so much attention. This could be in the next month likely, but the exact timing does not matter. Maybe Russia and Ukraine will agree to some ceasefire…who knows.
2. Russia’s economy will remain damaged for a long time. This further confirms what I have written for years, which is that emerging markets are a terrible investment. There is no reason to invest in emerging markets when big tech has better returns and much less downside.
3. Facebook stock is ridiculously cheap and will go higher. Even in the absence of growth, Facebook is still generating $40 billion annual profit from ads, similar to Google. Facebook has a PE ratio of just 13. This is cheaper than any blue chip stock.
4. “Iconic” U.S. brands Coca-Cola, Pepsi, McDonald’s and Starbucks have pulled out of Russia. Good riddance. They can export their obesity-causing foods elsewhere. But they will be back when the crisis ends. Just the latest shallow, transparent virtue signaling move.
5. Despite the recent selloff, the S&P 500 and Nasdaq will post an annual positive real return this year. The market will recover faster than anyone expects. The Ukraine situation will not hurt consumer spending, tech and retail earnings at all.
6. $100 oil and $5/gallon gas prices will not hurt the US economy and consumer spending at all, contrary to the media narrative that it will. The US economy did well in 2007 and most of 2008 despite surging gas and oil prices (it was the collapse of the financial and housing sectors that caused the recession, not gas and oil prices). Rhetoric and strong words about the need for ‘energy independence’ will predictably lead to nowhere, just like the last dozen times the issue has been raised and nothing came of it. This is not a ‘Biden thing’ either, as Republicans do not care that much either.
7. But Biden’s approval ratings will continue suffer, in part due to high inflation.