Russia Isn’t The Biggest Story For Beating the 2022 Market

(The following content is not a personal recommendation to buy any of the following companies as I am not taking your personal financial situation into account.)

I said a number of times in 2021 that it would be unusual for the market to go another year without a correction of 10% or more and whilst the Russian / Ukraine crisis is out of left field I think inflation by the end of 2022 will be the bigger story.

I am not attempting to discount the seriousness of the Russian invasion of Ukraine or the potential for it to escalate further but I think inflation will prove to be a bigger story by the end of 2022 when it comes to financial markets. Inflation is the biggest headwind share prices currently face and the Russia / Ukraine crisis is a sideshow that is adding fuel to the volatility fire in the short term.

I am not disrespecting the humanitarian cost Russia’s decision to invade Ukraine may have but I am not here to discuss those issues, I am here to make money and guide you the best I can as a professional investor. This current geopolitical crisis will end, we are unsure of exactly when, but I suspect it will be swift and decisive and economic output will continue to advance and great quality companies will thrive on the other side of this difficult period.

The bigger question is ‘Will we now see another global recession?”

The US Federal Reserve (dealing with high inflation) will now have to seriously consider ripping the band-aid off and raise interest rates quickly, which would threaten to put the US economy into a short sharp recession. It would not be their preferred option and they certainly wouldn’t frame it “the best thing to do is put the economy into a recession” but now that Russia has invaded Ukraine the US Fed’s inflation problems are only likely going to worsen and it may be the lesser of two evils. Unless the US Fed carefully manages the world’s biggest economy through this crisis they risk stagflation, which is when growth slows to a crawl and inflation remains high.

The Fed has waited too long to quit the stimulus program (it’s still doing it) and it should have been raising interest rates in October last year. It’s lost control of inflation and the only way to get it back under control is to push on the economic brakes with higher interest rates and by doing this it will induce a recession. Because the US Fed has been too slow to act, they are now left with fewer options. As difficult as it is to say, it may be the recession the US has to have. Those of you that are old enough will recall a former Australian PM saying something similar back in the early 90’s.

Oil and energy prices are spiking higher with Brent and WTI trading well over $100 a barrel on Thursday and whilst supply chain issues in 2021 were mostly centred around products coming out of Asia, the supply chain issues this time could be disrupted throughout all of Europe, which is the largest economic region in the world.

I indicated repeatedly in recent weeks that if Russia invaded Ukraine the market would likely decline 10% – 15% or more. The S&P 500 was already down more than 10% before the Russian invasion and the world is now left with no other option than to sanction Russia in a big way. Russia wants to change the regime in Ukraine and install a government that is pro-Russia and not pro-NATO and therefore in my view this crisis whilst only just starting and I personally think will come to a very swift end. Ukraine will fold and Putin will have what he wants within days and NATO will be helpless to stop him. What is clear is that Europe and in particular Eastern Europe, that relies on goods, services and energy supplies out of Russia is going to see significant disruptions.

What the market will also need to take into consideration is a potential China invasion of Taiwan and this is not priced in. If NATO allows Russia to invade Ukraine and take away its sovereignty without any significant resistance, China is going to see that as a positive and may decide to seize back Taiwan.

Rarely ever does the S&P 500 deliver even close to 9.4% in a year, the average yearly return is often much higher or much lower than the long-term average, in fact, the closest the S&P 500 has gotten to delivering a 9.4% return in the past 20 years was in 2016 when it delivered 9.54%. Given it’s already down 10-15% and the speed at which the Ukraine issue may resolve, I think we’re quickly approaching the time where potential gains could be highly rewarding.

The problem is you don’t want to wait until it’s already happened, you need to be in a position to be ready to enter and capitalize before it turns.  Even if you are ready to just trade the index, the greatest potential will be in the right shares that will benefit the most.  Our superpower is picking those shares and it’s all we ever talk about at Trading Mastery.  I can’t stress enough, now is the time to get ready to enter the market and if you’re already in it, consider investing more.

If you don’t want to miss out on this decades-long opportunity and want to learn more about how to ride the impending wave better than the index, register for my upcoming free training below… And I’ll show you how we are going to do it.

FREE Live Online Workshop:

How to Position Your Money in the Artificial Intelligence Boom

(7:30pm AEST Monday 27th of May 2024)

Enter Your Details
to Reserve Your Place