Thread by @vivekthebaria

Market View 2022:
1. Over the next few months, a lot of macro developments would impact our economy and markets.
The biggest being Fed's relentless watch on American inflation. They are hinting at very sharp interest rate increases, then stopping asset purchases (QE) and then ..

2. ..reducing their balance sheet as well.
The impact would certainly be drying up of liquidity around the world.
Sudden spike in bond yields which is already in Play.
Sharp rise in Dollar strength.

And if done unabettedly, this will shake every market out there very badly.

3. Frankly, I never thought Fed would go on this crusade so soon and so hard.

So are we in for tough 2022?

Well, that depends on what you compare it with!

Compared to last 1.5 years, Yes, the going is going to get very tough.

4. The trends will become shorter and shorter.
Debt laden companies will get punished.
High growth expectation companies will get punished.
Value and Dividend investing will make a come back.

But in all these not so good outlook, there is a silver lining.

5. Central govts including FED have an undeclared responsibility towards markets as well. As soon as the effect of these hawkishness would start to reflect on long term inflation projections, FED, in all probability, may go slow on its targets.

6. Central bankers are generally more concerned with Inflation projections than the real inflation.

7. As it is overshooting it's target presently to give a clear message that they are not ok with inflation, similarly as soon as inflation print starts to trend downwards, they would happily undershoot their stated targets.

8. That would be a pleasant surprise and all the companies that would be hit during the first half of 2022, may again come in flavour in the second half.. or even earlier.

9. As for India, Yes, we will also face decent corrections. But in all likelihood, we will outperform EVERY MARKET OUT THERE.

EVERY SINGLE ONE OF THEM.

Why?

10. Reasons are an open secret now.
A. RBI has one of the strongest balancesheet of all times in terms of reserves. It has very well absorbed the relentless selling by hot money in last couple of days and it can handle some more selling as well.

11.
B. FII stake in our markets has fallen substantially and domestic inflows are smartly outsmarting smart money of late. Indian working class has turned to SIPs like never before. Our financial investing is rising and that will continue to happen for many years now.

12.
C. We will probably be the fastest growing large economy for 2022, and likely for 2023 too.
So, institutions would need to maintain a certain allocation towards us. With other not so well protected economies coming under severe pressure, we may get an upgrade as well. 🤞

13.
D. In last few years, over all debt levels have gone down for Indian companies.
Banks have cleaned their books. New NPAs would take time. So banks shud accelerate lending cycle over the next 2-3 years. Recent Results from banking stalwarts are consistently highlighting this.

14. Overall, we have more reasons to cheer than to despair.
Choppiness over next few months could be high, but don't think we will see a Big crash.

15. Personally, I may tactically reduce my Equity exposure to 60-70% over the next 3 months, but would go for 90-100% allocation after that.

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