Prepare For A New Year's Rally

Omicron is spreading and the world is ending. Blah, blah, blah. Even though this ominously monikered strain might not be as fatal as feared, its rapid spread—along with rate hike fears from the Fed—caused stocks to fall Monday as seven of the 11 major S&P 500 sector indexes fell. Travel stocks took the biggest hit on news that the Omicron variant now accounted for around 40% of COVID-19 infections in London and at least one death in the country. But both the Fed and the Omicron have offered investors a buying dip on a silver platter. Indeed, the bubble may deflate a bit between now and the end of the holiday season, but early 2022 should see markets pop. 

Same Time Last Year 

Last year, while the Alpha variant, the first variant of concern, was coming up on investors’ radar, old-fashioned Covid-19 was ripping through the population of the United States. Infections and deaths rose predictably over the holidays, and yet the beginning of another big rally (as if the 2020 rally overall wasn’t big enough) was in the works. Craze over crypto and meme stock short squeezes were beginning to bubble up. Then, in the first part of 2021, the stock market went wild. Well, part of the market did: Crypto and Meme Stocks drove a speculative frenzy, creating a new generation of investors who had hitherto had little interest in the stock market or weirdly named faux currencies. So, the question is: Where will the highly speculative action in the market be this coming February? Another dog coin? Will Chinese stocks, which have been beaten to death this year, finally rebound? How about cruise ship stocks?' Vaccine companies? 

The answer is the same as it was last year: You can just bet on the overall market and you will be a winner. But look to buy after the first quarter of 2022 if these guys are right. 

2022 May Come in like a Lamb, But Go Out Like a Lion According to Marketwatch, Managing Director and Market Strategist of Stifel, Barry Bannister, envisions a bubble of historic proportions caused by what he sees as the Fed’s “poor monetary and fiscal decisions since COVID-19.” Barry and his team see the S&P falling to the low 4000s in the first quarter of next year, only to go bananas after that. 

“Later in 2022-23E, we believe the ‘behind-the-curve’ Fed might create the third bubble in 100 years, by 2023 to 6,750 for the S&P 500 (Nasdaq [approximately] 25,000),” says the Stifel team. This bullish sentiment is more of a warning than anything. Because, the Stifel team says, the bubble is going to burst and, when it does, it’s going to be as bad as the ones with which we are all familiar. The cause? In a word: populism. “Populism (which the Fed and Treasury seemingly embrace) leads to poor choices and even worse outcomes. Rate repression may again create a bubble that bursts (always do), followed by a lost decade,” predicts the team. 

A lost decade? Well, that doesn’t sound very promising. But that's it