Hey There Income Hunters,
A new year usually brings about cycle changes that draw funds in from FOMO, which then fuels new trends.
This year should be no different, with the shift in Fed policy demanding many changes throughout the year.
One sign of a major shift coming is the 2021 “most crowded trade” graph:
The technology services sector has been the most crowded trade in 2021, although it only returned 11%, compared to much less crowded trades like energy (like the Energy Select Sector SPDR Fund (Ticker: XLE)), which was up 11%, and SPDR S&P Metals and Mining ETF (Ticker: XME), which was up 24%.
Today, I’ll show supporting data for a major shift in positions in Q1 that will provide tremendous opportunity for food profit as we move ahead into 2022.
COVID Will Become Less a Topic in 2022
This latest COVID omicron variant may end up being a blessing in disguise. It is definitely more contagious, with a record 235,000 new cases on Wednesday this week. However, the number of deaths have been plummeting.
I got it on a trip to New York recently, as did a close friend and my daughter, but for me and my daughter it was only as severe as a bad cold.
The numbers tell a very promising story for 2022 and an all-but-squashed COVID will have a major impact on changing trends in the markets.
The report I read said omicron is one big “vaccination machine” that is picking up steam. It may wind up infecting 80% of the population, producing mild symptoms, and potentially giving us a chance of ending the pandemic in 2022.
A “no COVID” economy would reignite demand for raw materials and renew the commodity rally we saw in H1 of 2021.
A year with limited COVID concerns could also give the Fed more ammo for tightening, and would not be good for tech.
How About This Stat …
There is $16 to $17 trillion tied up in NASDAQ 100 (Ticker: NDX) single name stocks and overall large-cap tech ETF exposure, while the energy ETF (XLE) and Metals and Mining ETF (XME) combined is under $2 trillion.
The rate of change in inflation may lessen in 2022, but it will prove to be more sustainable for longer …
The trade that will become crowded in 2022 will be assets shifting from financial assets (stocks and bonds) into hard assets (energy and industrial commodities).
Stay Focused on the Larger Secular Trend that will reinsert itself in 2022
The Fed’s tightening cycle will be rejuvenated by the reduction of COVID concerns. The ramifications will be an eventually deep correction in financial assets.
At the same time, demand for hard assets will rise as real infrastructure improvements PLUS the green energy revolution take hold in 2022.
Keep the chart below in mind …
This will remind you that the larger global macro driver of flows will be with us for many years.
The critical event in 2022 will be when the Fed has to flip back to stimulating the economy due to a collapse in financial assets and an economy that is in danger of recession.
Once the Fed flips back, the dollar will revert to it’s longer-term downtrend and money will flow into real assets in a big way!
Bring It Home
I would like to take a moment to thank all the subscribers to Power Income Trader (PIT), and tell you how much I look forward to working hard for you all in 2022.
I have found delivering the macro theme and trade ideas to you more gratifying than trading for myself.
We are all in this together … As we beat the central banks (CBs) at their own game …
CB’s around the world remain mired in a debt trap, which limits the moves they can make. That puts us at an advantage in the markets and will enable us to build tremendous wealth in the years ahead.
I wish all of you the happiest of holidays and an awesome 2022. God Bless and as always …
Live and Trade With Passion My Friends,