by Gary Alexander

January 4, 2022

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.”

–Charles Dickens, writing in 1859 about 1789.

When Dickens wrote, “It was the best (and worst) of times,” the U.S. Civil War was right around the corner, so things got worse real fast. They also got way worse in the 1789 France he wrote about, but in the long run the end of slavery and secession and the end of the French monarchy were huge positives.

A year ago, on January 1, 2021, I was in the KLOI-fm radio studio hosting my regular New Year’s Big Band Bonanza, spinning 1940s Glenn Miller hits, but I paused to play Everything’s Coming Up Roses to mock California’s decision to disallow even a few hundred family members to attend an empty Rose Bowl, farming the oldest Bowl out of state for the first time since 1942, when we feared Japanese bombs.

Both decisions were silly overreactions, it turned out. (Today, the Rose Bowl is back home, in Pasadena.)

Who would have thought last January 1 that we would soon face (1) January 6, (2) a killer Texas freeze in February, (3) more COVID deaths in 2021 than 2020, (4) the highest inflation rate in 40 years, due to (5) $120 billion a month in fiat money and (6) a choked global supply chain; (7) natural disasters, including killer tornadoes and fires; (8) an ignominious exit from Afghanistan; (9) a crisis on our southern border; (10) worker shortages; (11) political divisions; and (12) huge spending bills, fueling a $2.7 trillion deficit.

That caused a huge stock market crash, soaring gold, and a sinking dollar, right?  Well, no. The U.S. dollar index gained nearly 7% to key global currencies and gold lost 9%, while the S&P 500 rose 26.9%!

With that in mind, I will concentrate on some glass-half-full positives of events we may avoid in 2022.

Five Financial Forecasts

“If you see ten troubles coming down the road, you can be sure that nine will run into the ditch before they reach you.” –Calvin Coolidge

Space is short, so I will be brief – in the spirit of “Silent Cal” Coolidge.

Inflation will recede to 3% in the second half (due to tapering). Since inflation is a monetary phenomenon, the end of $120 billion per month in quantitative easing and fewer super-spending bills in Congress (below) will result in lower inflation in the second half. The supply crunch will also self-correct, causing a glut of goods, depressing prices. This will also tend to put a damper on the Fed’s rate increases.

Federal Funds Effective Rate Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

There won’t be three interest rate increases in 2022 (probably two, maybe one). If inflation recedes, the Fed will have second thoughts about raising rates three times in an effort to “fight inflation.” If first-quarter growth recedes back to 2.5%, the Fed will also have second thoughts about rate increases. The stark truth is that a $30 trillion public debt becomes too costly to finance when rates rise above 2%.

Most of those “missing” American workers will go back to work. After cashing overly long and generous stimulus and relief payments, most workers now “on strike” will return to work. Their savings are running low and the rise in asset prices (real estate, bitcoin, stocks, et al) have stalled. Studies have shown that families that win lotteries or windfalls (like forgiven rent) tend to avoid work until they need more money. (See “New Hope for Easing Labor Shortage,” Wall Street Journal, December 20, 2021).

Personal Savings Rate Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

There will be fewer super-spending bills in an election year. Senator Joe Manchin (D-WV) will stand like a Colossus of Rhodes in Congress blocking any super-spending bills, and the public will rally behind candidates like Joe (Manchin, not Biden) in the fall, resulting in “A House with Many Manchins.”

The November mid-term elections will fuel a year-end market rally, as the Republicans regain control of the Senate and perhaps the House, returning the nation’s central government to “gridlock,” which most voters and Wall Street favor, resulting in a 10% annual gain to Dow 40,000+ and a S&P 500 over 5,250.

Five Geopolitical Forecasts

The first two fears below are based on Washington’s Cold War mentality, a constant search for new ways to worry about the world around us – new threats, new wars to start, new excuses to send troops overseas.

China will NOT invade Taiwan. This is our biggest recurring fear, but China has too much to lose by alienating the entire world and possibly provoking a united military counterattack from Western powers. China is very patient. They are willing to wait a century before reaching détente with this lost island state.

Divided Ukraine Map Image

Russia will not invade Ukraine (but Southeastern Ukraine may secede). By the same token, there is no need for Russia to invade a region that is open to their presence. The eastern half of Ukraine is dominated by Russian nationalists, while the western half is more ethnic Ukrainian. If anything, it makes more sense to stage an amicable divorce, as Czechoslovakia did when they became the Czech Republic and Slovakia.

There will be no U.S. Insurrection (or major riots). Another major fear is a new Insurrection, especially by pro-Trump forces, similar to January 6. Trump-phobic publications like The Atlantic, or networks like CNN harp on this fear, but there is a near-zero chance any sensible group would march into a slaughter.

Gauteng's Omicron Wave Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Omicron (and COVID) will ‘normalize’ by mid-year with a very low death rate. As with most previous pandemics, this virus will become widespread and less lethal over time and will seem more like a normal flu by year’s end, with typical incidence rates and death rates of a normal flu by next winter.

Neither Biden nor Trump (nor Harris) will be a Presidential Nominee in 2024. There will be a great deal of wasted wind and ink this year about the 2024 election, most of it centered on the 2020 candidates that will be less relevant by 2024, but history shows that front-runners often fade as new blood emerges.

There will be a surprise shock or two in 2022, but nobody can possibly guess its nature in advance.

Happy (I Hope) New Year. Now, if I could only predict when the CDC will let us back on cruise ships!

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.

POLL QUESTION:

Marketmail Survey #14 is now closed.

Also In This Issue

A Look Ahead by Louis Navellier
What the 10-Year Yield Says about a “Fair P/E Ratio”

Income Mail by Bryan Perry
My Five “High Hopes” For 2022

Growth Mail by Gary Alexander
My 10 Slightly Boring Predictions for 2022

Global Mail by Ivan Martchev
Bitcoin is Not Acting Well

Sector Spotlight by Jason Bodner
Time Heals All Wounds – And Makes Some Bad Years Good

View Full Archive
Read Past Issues Here

About The Author

Gary Alexander
SENIOR EDITOR

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

Important Disclosures:

Although information in these reports has been obtained from and is based upon sources that Navellier believes to be reliable, Navellier does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute Navellier’s judgment as of the date the report was created and are subject to change without notice. These reports are for informational purposes only and are not a solicitation for the purchase or sale of a security. Any decision to purchase securities mentioned in these reports must take into account existing public information on such securities or any registered prospectus.To the extent permitted by law, neither Navellier & Associates, Inc., nor any of its affiliates, agents, or service providers assumes any liability or responsibility nor owes any duty of care for any consequences of any person acting or refraining to act in reliance on the information contained in this communication or for any decision based on it.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any securities recommendations made by Navellier. in the future will be profitable or equal the performance of securities made in this report. Dividend payments are not guaranteed. The amount of a dividend payment, if any, can vary over time and issuers may reduce dividends paid on securities in the event of a recession or adverse event affecting a specific industry or issuer.

None of the stock information, data, and company information presented herein constitutes a recommendation by Navellier or a solicitation to buy or sell any securities. Any specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. The holdings identified do not represent all of the securities purchased, sold, or recommended for advisory clients and the reader should not assume that investments in the securities identified and discussed were or will be profitable.

Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. Individual stocks presented may not be suitable for every investor. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. Investment in fixed income securities has the potential for the investment return and principal value of an investment to fluctuate so that an investor’s holdings, when redeemed, may be worth less than their original cost.

One cannot invest directly in an index. Index is unmanaged and index performance does not reflect deduction of fees, expenses, or taxes. Presentation of Index data does not reflect a belief by Navellier that any stock index constitutes an investment alternative to any Navellier equity strategy or is necessarily comparable to such strategies. Among the most important differences between the Indices and Navellier strategies are that the Navellier equity strategies may (1) incur material management fees, (2) concentrate its investments in relatively few stocks, industries, or sectors, (3) have significantly greater trading activity and related costs, and (4) be significantly more or less volatile than the Indices.

ETF Risk: We may invest in exchange traded funds (“ETFs”) and some of our investment strategies are generally fully invested in ETFs. Like traditional mutual funds, ETFs charge asset-based fees, but they generally do not charge initial sales charges or redemption fees and investors typically pay only customary brokerage fees to buy and sell ETF shares. The fees and costs charged by ETFs held in client accounts will not be deducted from the compensation the client pays Navellier. ETF prices can fluctuate up or down, and a client account could lose money investing in an ETF if the prices of the securities owned by the ETF go down. ETFs are subject to additional risks:

  • ETF shares may trade above or below their net asset value;
  • An active trading market for an ETF’s shares may not develop or be maintained;
  • The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track;
  • The cost of owning shares of the ETF may exceed those a client would incur by directly investing in the underlying securities; and
  • Trading of an ETF’s shares may be halted if the listing exchange’s officials deem it appropriate, the shares are delisted from the exchange, or the activation of market-wide “circuit breakers” (which are tied to large decreases in stock prices) halts stock trading generally.

Grader Disclosures: Investment in equity strategies involves substantial risk and has the potential for partial or complete loss of funds invested. The sample portfolio and any accompanying charts are for informational purposes only and are not to be construed as a solicitation to buy or sell any financial instrument and should not be relied upon as the sole factor in an investment making decision. As a matter of normal and important disclosures to you, as a potential investor, please consider the following: The performance presented is not based on any actual securities trading, portfolio, or accounts, and the reported performance of the A, B, C, D, and F portfolios (collectively the “model portfolios”) should be considered mere “paper” or pro forma performance results based on Navellier’s research.

Investors evaluating any of Navellier & Associates, Inc.’s, (or its affiliates’) Investment Products must not use any information presented here, including the performance figures of the model portfolios, in their evaluation of any Navellier Investment Products. Navellier Investment Products include the firm’s mutual funds and managed accounts. The model portfolios, charts, and other information presented do not represent actual funded trades and are not actual funded portfolios. There are material differences between Navellier Investment Products’ portfolios and the model portfolios, research, and performance figures presented here. The model portfolios and the research results (1) may contain stocks or ETFs that are illiquid and difficult to trade; (2) may contain stock or ETF holdings materially different from actual funded Navellier Investment Product portfolios; (3) include the reinvestment of all dividends and other earnings, estimated trading costs, commissions, or management fees; and, (4) may not reflect prices obtained in an actual funded Navellier Investment Product portfolio. For these and other reasons, the reported performances of model portfolios do not reflect the performance results of Navellier’s actually funded and traded Investment Products. In most cases, Navellier’s Investment Products have materially lower performance results than the performances of the model portfolios presented.

This report contains statements that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are “forward-looking statements” within the meaning of The U.S. Private Securities Litigation Reform Act of 1995. These statements may be identified by such forward-looking terminology as “expect,” “estimate,” “plan,” “intend,” “believe,” “anticipate,” “may,” “will,” “should,” “could,” “continue,” “project,” or similar statements or variations of such terms. Our forward-looking statements are based on a series of expectations, assumptions, and projections, are not guarantees of future results or performance, and involve substantial risks and uncertainty as described in Form ADV Part 2A of our filing with the Securities and Exchange Commission (SEC), which is available at www.adviserinfo.sec.gov or by requesting a copy by emailing info@navellier.com. All of our forward-looking statements are as of the date of this report only. We can give no assurance that such expectations or forward-looking statements will prove to be correct. Actual results may differ materially. You are urged to carefully consider all such factors.

FEDERAL TAX ADVICE DISCLAIMER: As required by U.S. Treasury Regulations, you are informed that, to the extent this presentation includes any federal tax advice, the presentation is not written by Navellier to be used, and cannot be used, for the purpose of avoiding federal tax penalties. Navellier does not advise on any income tax requirements or issues. Use of any information presented by Navellier is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.

IMPORTANT NEWSLETTER DISCLOSURE:The hypothetical performance results for investment newsletters that are authored or edited by Louis Navellier, including Louis Navellier’s Growth Investor, Louis Navellier’s Breakthrough Stocks, Louis Navellier’s Accelerated Profits, and Louis Navellier’s Platinum Club, are not based on any actual securities trading, portfolio, or accounts, and the newsletters’ reported hypothetical performances should be considered mere “paper” or proforma hypothetical performance results and are not actual performance of real world trades.  Navellier & Associates, Inc. does not have any relation to or affiliation with the owner of these newsletters. There are material differences between Navellier Investment Products’ portfolios and the InvestorPlace Media, LLC newsletter portfolios authored by Louis Navellier. The InvestorPlace Media, LLC newsletters contain hypothetical performance that do not include transaction costs, advisory fees, or other fees a client might incur if actual investments and trades were being made by an investor. As a result, newsletter performance should not be used to evaluate Navellier Investment services which are separate and different from the newsletters. The owner of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or hypothetical Newsletter performance claims, (which are calculated solely by Investor Place Media and not Navellier) should be referred to InvestorPlace Media, LLC at (800) 718-8289.

Please note that Navellier & Associates and the Navellier Private Client Group are managed completely independent of the newsletters owned and published by InvestorPlace Media, LLC and written and edited by Louis Navellier, and investment performance of the newsletters should in no way be considered indicative of potential future investment performance for any Navellier & Associates separately managed account portfolio. Potential investors should consult with their financial advisor before investing in any Navellier Investment Product.

Navellier claims compliance with Global Investment Performance Standards (GIPS). To receive a complete list and descriptions of Navellier’s composites and/or a presentation that adheres to the GIPS standards, please contact Navellier or click here. It should not be assumed that any securities recommendations made by Navellier & Associates, Inc. in the future will be profitable or equal the performance of securities made in this report.

FactSet Disclosure: Navellier does not independently calculate the statistical information included in the attached report. The calculation and the information are provided by FactSet, a company not related to Navellier. Although information contained in the report has been obtained from FactSet and is based on sources Navellier believes to be reliable, Navellier does not guarantee its accuracy, and it may be incomplete or condensed. The report and the related FactSet sourced information are provided on an “as is” basis. The user assumes the entire risk of any use made of this information. Investors should consider the report as only a single factor in making their investment decision. The report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. FactSet sourced information is the exclusive property of FactSet. Without prior written permission of FactSet, this information may not be reproduced, disseminated or used to create any financial products. All indices are unmanaged and performance of the indices include reinvestment of dividends and interest income, unless otherwise noted, are not illustrative of any particular investment and an investment cannot be made in any index. Past performance is no guarantee of future results.