Welcome to the last (albeit shortened) week of trading in a year that brought a war on European soil, economic angst and lots of losses for investors, rather than what some had perhaps expected — rebuilding, recharging after the pandemic.
So goodbye already, 2022.
Naturally against this backdrop, it’s hard to blame investors or strategists for wariness headed into 2023. Wall Street is largely penciling in a modest finish of around 4,000 next year for the S&P 500 SPX,
But if it’s a bit of optimism you’d like to hear, our call of the day from Clocktower Group’s Marko Papic is bringing it, along with some investment ideas to fit that theme.
In a lengthy Twitter spaces chat with Michael Green of Simplify Asset Management, Papic walks through investor concerns over war, inflation and energy, and suggests looking back at history when conflict fostered innovation. He sees that coming via energy, technology to improve lives and green transportation.
“All that stuff will be happening on one end, on the other end, you will have an inflationary decade for sure, but I’m not sure it’s going to reflect the 1970s and the reason it cannot reflect the 1970s is because the macro context on many fronts is still deflationary, whether it’s the savings glut, whether that is deglobalization, which is not going down to zero.”
Papic, who sees 3% to 5% “manna from heaven” inflation over the next decade, says another reason why inflation won’t run away is because of a lack of 1970s-era labor movements.
“We still remain in this goldilocks scenario” for the longer term, and that’s bullish for stocks, he says. “But this isn’t about the S&P 500. This is about a view that the world does not end. And you have to ask yourself where is the apocalypse premium priced in, where you should push against.”
Papic sees the “structural commodity supercycle intact. China will maintain its trajectory, resume stimulating real estate but won’t go up or down,” he said, noting that additional demand for metals will come from that green transition.
He also makes a bullish case for Europe, and with that German industry, which some may have written off over the energy struggles facing Europe. But Papic says Russia’s invasion of Ukraine has lighted a fire under the country, as he sees LNG infrastructure investment picking up and energy supply normalizing by 2024.
One area investors should be wary of is a looming chip glut.
“Made in China 2025′ triggered a 6-year delayed rush to build microchip fabs, which in the short run will be inflationary, but in the medium run will eventually create a global glut,” as “4-star generals make the call on where to build chip fabs,” he said.
The whole interview can be found here, with a some highlights by Bloomberg quant researcher Steve Hou.
Read: MarketWatch’s 2022 stock of the year: Warren Buffett, oil and a 120% return
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