Inflation, Gas Prices and Ukraine: Where We See the Market Going in 2022
As I’m sure most of you are aware, the market has taken a beating in the last six months. It’s hard to be unaware, with gas prices creeping up on $5 a gallon in Florida over the past few weeks, and while the current administration would love for us to believe that this is two countries in Eastern Europe’s doing, that’s not exactly the case.
With 40% of all the money ever printed in the United States having been printed in the last 18 months, yes, you read that right. 40% of all the money EVER printed, including bills out of circulation, it is hardly a supply issue that gas is high, and your groceries cost about 17% higher this year as they did the same time last year, via real inflation numbers. While the CPI index says inflation was about 7%, this is also not the case either, when the governing body is allowed to change the variables that go into the equation to calculate inflation, it’s not difficult to get a more desirable outcome than is the case.
So where do we see the market going in 2022? While I won’t pretend to be a geopolitical expert, it’s hard to say that Russia is feeling any kind of real heat from the U.S. right now, and while sanctions seem to be doing little to sway them, a glimmer of hope of war in Europe not becoming war at home is how poor the Russian military has looked on the world stage. With Ukrainian civilians giving the worlds 2nd or 3rd ‘superpower’ more than they can handle, it is hopeful that the kremlin and Ukraine will reach a diplomatic solution.
Since the market has already seen a selloff of sorts, in particular tech, we are viewing the current market state as a steep discount for a potential swing back to the green in the remainder of 2022. With the situation in Europe, it is unlikely that the Fed will be as aggressive as previously thought with interest rates, and this should relieve some tension on the broad market. While we aren’t at April 2020 lows, current market levels offer a great entry point into the market. While timing the market is impossible, we often hear “isn’t the market at the top?” While this doesn’t really matter in the long term, especially over a 5–10-year period, it is always nice to buy things ‘on sale.’
With the U.S. banning Russian energy imports, it’s very likely that this slack will have to be made up by domestic oil companies, offering another solid opportunity in a sector that has seen a strong selloff in the last 5 years. While human nature makes us want to buy in when the market is high and we hear of everyone making money, and stay away when it’s a little lower, smart investing says we should do the opposite. With inflation at all-time highs, our advice is to take the discounts and get invested In the market, because any cash you have sitting in the bank is currently losing about 10% of its purchasing power.
-Colin Feller