by Gary Alexander

January 4, 2022

I’ll be the first to admit that my 10 “rather boring” 2022 predictions weren’t so great – batting about 50-50 – but I was rowing against the tide of conventional wisdom, so that’s not bad. In the spirit of “less,” I’ll cut back to 8 ideas and not be so bold for most of them – just a continuation of some current trends, but (blessedly) far less of the bad stuff we saw in 2022. I’ll start with the four financial forecasts first.

Four Fearless Financial Forecasts For 2023

#1: Inflation will calm down to 3% by mid-year. Since reckless monetary inflation in 2020 and 2021 caused runaway price inflation in 2021 and 2022, the rapid tightening of money supply and record fast interest rate increases of 2022 will reduce the rate of inflation quite rapidly in the first half of 2023.

M2 Money Supply Chart

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

Money creation is a seductive solution to the world’s ills, giving rise to Modern Monetary Theory (MMT), the belief that sovereign nations can print unlimited amounts of new money, so long as they have the authority to redeem it in ways they choose. They have no historic precedent of this working out well, and plenty of evidence of the opposite. Even John Maynard Keynes, later a fan of deficit spending, wrote in 1919, agreeing with Lenin: “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

–From “The Economic Consequences of the Peace,” by John Maynard Keynes, 1919

Sadly, the Fed may push us into a recession – due to its monetary folly over the past three years – but they will “lick inflation” in the process, just like Paul Volcker did back in the painful years of 1979-1982.

Core PCE Inflation Chart

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

#2: The U.S. Dollar will lose its mojo as euro rates rise. Europe was the first continent to try MMT and the first to abandon it with rapidly rising rates to try to match the U.S. dollar’s returns. For years, global capital fled to the U.S. dollar for real returns and stability, pushing the euro and yen down and the dollar up. That should reverse in 2023, as global rates rise to meet the dollar, giving the euro a boost and the dollar no advantage, reversing the 8.2% gain in the U.S. Dollar Index (DXY) in 2022, and a phenomenal 25.8% gain in that index from May 24, 2021, to October 10, 2022. The Dollar Index has already dropped almost 10 points from 113.3 to 103.5 since October 10, so it is well on its way to fulfilling this prediction.

Euro Index Chart

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

#3: Gold (rising to $2,100), oil (at $110), and other commodities will rise as the dollar falls. Gold has had a bad year because the dollar mostly rose, since the dollar and gold tend to move in a mirror image, but gold and silver have rallied strongly in the fourth quarter, due largely to the decline in the U.S. dollar.

Gold and silver actually ended 2022 up a bit, due to the dollar’s decline since October. In the last two months of the calendar year, gold shot up over $200 per ounce, from $1,627 to $1,830 (+12.5%), while silver rocketed from $18.01 on October 13 to $24.13 at year’s end, up 34%. A couple of respected analysts are predicting $3,000 to $4,000 gold this year. I won’t go near those figures, but a new high at $2,100 gold and a 10-year high of $30 silver seem reasonable, as well as $110 oil sometime in the spring.

Gold Price versus M2 Money Supply Chart

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

#4: Stocks should recover in the third year of the Presidential cycle. Fed Chair Jerome Powell scuttled the Santa Claus rally and the normal post-mid-term election euphoria, but he can only play Scrooge for so long. Even in December 2018, when he played the same Ebenezer Scrooge role, the market soared in 2019, the last Year 3 of a Presidential cycle. Most Year 3 gains are concentrated in the first half of Year 3 of the cycle. The average November-April S&P 500 returns for the 10 mid-term election cycles since 1980 are +12.9% with only 3% added in the next six months (a +15.7% return for the year after the mid-terms ).

Presidential Cycle Average Returns Chart

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

Four Global Victories for the Good Guys (and Gals)

#5: Putin will lose in Ukraine: Vladimir Putin will be forced to withdraw from Ukraine. He may not admit defeat. He may not be dethroned, but either (1) the average Russians will not support him or report for the draft; or (2) his generals will revolt; or (3) he will be forced to negotiate a truce; or (4) he will die of illness or be “terminated” from within by the same brutal means he used to kill so many of his rivals. By whatever means, when the end of the Ukrainian war becomes evident, global stock markets will rally.

#6: Covid chaos will resume in China, crippling their manufacturing capacity again. This is sad for the innocent people of China, but there is a certain justice to the leaders of China, as they exported this killer bug three years ago. Since then, China’s leaders refused the best vaccines in favor of their own ineffective cures, then they cracked down on their infected or endangered population. Let’s hope it is a more benign, less deadly strain for the benefit of the innocent victims, but the effect may be that manufacturing hubs will move elsewhere or to America, posing a threat to the power of China’s dictator-for-life, Xi Jinping.

#7: Fossil fuels will stage a rally. With this brutal winter killing so many hundreds in affluent Europe and North America, we are reminded that cold weather has always killed 7 to 10 times more people than heat*, and so our premature rush to alternative energy sources has been a deadly decision. Fossil fuels will stage a rally, as they are now cleaner and in abundant supply, and there are hidden dangers, costs, and environmental threats inherent in the wind and solar alternatives. Global cooling is also a major risk.

*In November 2022, Bjorn Lomborg wrote in the Wall Street Journal that from 2000 to 2019, 20,000 North Americans died from heat but 170,000 died from cold, writing, “Cheap and reliable energy to keep us warm used to be the hallmark of prosperous countries; no more because of our climate obsession.”

#8: The U.S. women will win the World Cup this summer (winter in Australia). After the U.S. men’s soccer team won one game and then bowed out, preparing for a bigger spectacle at home in 2026, the U.S. women’s team has long been considered the world’s best, thanks in part to our Title IX equality in sports access in U.S. colleges. The 32-team Women’s World Cup tournament will gather in Australia and New Zealand from July 20 to August 20 (their winter). The U.S. team is led by 33-year-old Alex Morgan, with 119 goals in 200 international matches, but there is talent from top to the bottom in this gifted roster.

I’ll close with a wish more than a prediction. I wish that Congress and the President would spend less on pork and just about everything else, especially with average interest rates on our $32 trillion national debt nearing 5%. We can’t afford spending over $1 trillion on debt service each year. Now is the wrong time to draft “wish lists” for 435 home districts and pie-in-the-sky schemes for spending more tax dollars.

Say “Amen,” somebody.

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

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
M2 Growth Goes to Zero

Sector Spotlight by Jason Bodner
The Best Way to Predict the Future is to Help Create It

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Read Past Issues Here

About The Author

Gary Alexander

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

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