Hey There Income Hunters,
One of the powerful macro driving forces that will have a major impact on the markets this year is progress in the changing world order.
That might sound alarming – but it’s true!
Let me explain.
I’ve spent years researching the past credit cycles of nations and I’ve discovered patterns that give us clues about what’s coming next
You see, it escapes a lot of people that the US really only became the dominant nation and reserve currency of the world in 1945 …
And that every nation that previously held that monetary distinction held it for about 50 to 100 years.
The US is just above the middle of that range at 77 years.
And COVID has sped up the process for the US.
This will make a massive difference in how the markets trade in 2022.
Today, I will share some critical thoughts on the major issues facing the US and the global markets in 2022.
Three Major Forces
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- The Long-term Debt Cycle: Interest rates have never been so low, or even negative, on the massive amounts of global sovereign debt as they are today. Last year the amount of negative interest rate debt in circulation peaked at $18 trillion dollars.The US is currently the world's reserve currency, which makes it easy to sell debt to foreigners. However, this is beginning to change as our trading partners are already preparing for a shift to the global monetary system.
- The Internal Conflicts in the US: Wealth, values and political gaps are now larger in the US than any time since 1945, when the cycle started. We see extreme division, even amongst our leaders, which makes it difficult to make strategic decisions quickly.
- The Rising Power of China will Challenge the US: Russia was the only power we ever had to consider, but their strength was only ever on the military front. China, however, can compete with us in most areas and as a Communist party they can make decisions very quickly.
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Observations
I see No. 3 moving quickly, especially in the areas of trade, technology, geopolitics, and in economic growth.
Figuring how the above conflicts and changes will impact the markets is critical in the months ahead.
Let’s take a look at some possibilities …
China’s Economy is the One to Ride in 2022
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- China has already gone through their tightening cycle by forcing tough regulations on the mega-cap technology companies.
- They are now poised to begin an easing cycle that will fuel serious growth in 2022.
- Meanwhile, the US will be tightening and slowing growth, maybe even severely.
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This presents some awesome opportunities to be in the Chinese market and short the US market. China is as cheap versus the US as they have been over the past two years.
Bring It Home
The weeks ahead will provide an ideal time to execute these “paired” trades …
If you want to crush it this year you need to explore “alternative markets” like Europe and Asia to get long equities that will have a tail wind of lower interest rates to boost their value.
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In the US the Fed is hell bent on raising rates.
I may not agree with that plan but I know what those actions will do to the markets and at the end of the day you’re here to make profits.
I’m setting you up for that.
Live and Trade With Passion,
Griff