Today's video is sponsored by moomoo more on them in a moment check the link down below. In the meantime, hey everyone meet kevin here in this video. I'm going to break down some reports that we have about what might happen in 2022 regarding the s p 500. Based on wall street estimates and what could happen potentially in january as well as some other thoughts, let's just get right into it.

So first jp morgan says the market is setting up for what they call a strong january effect, and this is an old wall. Street theory that calls for big stock gains in the early part of the year. Now i've always thought that maybe people who took losses in december after the 30-day wash rule are going to hop back into the market in january. But jp morgan says it's not just a typical sort of annual pattern, but it's that the current market is set up to look particularly good for quote high momentum stocks, as these stocks have experienced large sell-offs recently, but nothing has changed fundamentally now they didn't specifically go Into which stocks, but we can guess all you have to do - is like we talked about earlier on the channel today, sort by market cap.

Look at some of these ridiculously oversold. Small caps and jp morgan is suggesting that investors are being too bearish overly bearish than what they should be. It's my belief that hedge funds and institutions are shorting small caps, because it's just the easy thing to do right now to hedge your portfolio. So if you're long on the mega caps or large caps and your short small caps, you are crushing it in this market and at this point, there's no sign that this is going to end.

But when this pain ends, i expect it to flip back quickly. Jp morgan believes that we could see this movement come in january because of what they call the january effect look for small caps, though that have had high momentum in the past, so momentum, stocks think, for example, shift technologies for a period of time. Big momentum, tattooed chef had a lot of momentum for a period of time. Lemonade had a lot of momentum for a period of time, corsair not so much after it hit the market after it had its public offering but uh you there.

There are plenty of smaller cap stocks, even uh, consider stocks like arcamodo or fisker that are just ridiculously oversold in this market. Jpmorgan thinks look this one up quote. The january effect is going to give us a big u-turn here now. Others believe wait a minute.

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Fernandez said that historically, equity markets keep going up after a first rate, hike and usually don't actually start being affected until the fed's second or third increase. Now. This is really interesting because if we look at the fed's summary of economic projections, we know that we're expecting about three hikes in 2022, but the first one with about a 90 percent chance according to fed futures, is expected to come in march. That probably sets us up for the second one coming sometime, uh in in the summer to the third quarter of 2022 for the second and third, so look for the summer to q3 of 2022 for potentially the impact, at least according to this market strategist.

That march, just because we get our first rate increase might actually not imply that markets are just going to sell off that. A lot of this could already be priced in, and, what's really interesting is if we look at market history, we see that the s p, 500s, average annual return - was listen to this 10.5 percent between 2004 and 2006.. Now we know that was before the 2008 bubble, but during that period of time the federal reserve hiked interest rates 17 times. Folks, 17 hikes, in that you know three-ish year period and stocks return an average of 10.5 percent in the s p, 500 or the s p.

500. The s p 500 also returned 9.8 annually during 2006 or sorry 2016 to 2018. During the rate hikes up. Until of course, that painful crash that we had at the end of 2018 we're finally like that's it enough - is enough: stop raising rates, jerome powell, you're effing up the market, and of course we had that brief real estate crash in the summer of 2008.

I'm sorry that was a big real estate crush the summer of 2018 and about may to june we saw real estate prices plummet about 12. You could actually go back and watch my videos from 2018. If you scroll back through my channel and you'll, see me going. Oh my gosh something bad's happening.

It was crazy, but anyway uh. The other thing to note is 13 banks and financial service forms firms have put together their 2022 forecasts and the average return that they're expecting for the s. P 500 for next year is 4.5, which doesn't hold the candle to the 16 that we got in 2020 or the over now 26 that we've gotten in 2021. So really low estimates expected for 2022, which kind of implies that the big caps, those mega caps like the apple microsoft, netflix, adobe, jp, morgan, berkshire, hathaway tesla.

Google might not be that big of players in 2022. Who knows, maybe 2022 will be the year of the small cap wishful thinking at this point anyway. Now there's mixed sentiment about what to expect uh from 2022. Obviously, uh i mean morgan stanley is actually predicting a drop of 6.9 in the s p in 2022 and sees it up 12, so the average uh is 4.5 but you're, seeing quite a spread.

Now. Behrens has also recently come out saying that the options market is literally going nuts that we've seen daily volume of over 50 million contracts compared to 21 years ago. In 2000, during the dot-com bubble era, we had about a million contracts trade on an average day, we're 50 x that that's insane and they're basically saying it. Right now feels like people are trying to buy lottery tickets, saying that people realize that all they need is a bullish call with an expiration date, close to an earnings report, and then they nail it to get rich, and so this is dangerous.

Remember call options, especially on small caps. Right now will bleed you dry. It is painful right now, if you are holding small cap, call options it sucks. Okay, like a good strategy, might be not financial advice.

Close those and sell puts because so many people are buying, puts on them. The premiums on sell puts are beautiful right now, because everybody's shorting them uh anyway, blackrock also published their 2022 outlook. By the way, i teach things like this in the programs on building your wealth link down below uh and, of course, check out that link for moomoo link down below okay. Now blackrock published their 2022 outlook, and this was interesting now remember: blackrock is uh one of the largest institutional investors in america.

Their outlook is as follows: positive year for stocks negative year for bonds, they reiterated that we're probably going to settle with inflation levels above pre-covet trends, so we're still going to be a little bit elevated on inflation, and that is why they favor equity over bonds. So stocks over bonds, they do recognize that we're going to be going through a little bit of a withdrawal period, though of stimulus no longer coming towards us and that they're expecting rate hikes. But they do think the fed's going to be tolerant of inflation. Much more tolerant than it has in the past, which kind of implies less aggressive rate hikes than like what we saw in 2018.

When we led to that crash at the end of 2018 right. They do believe that the fed's going to raise rates in 2022, but not as soon as the market is pricing in they actually think the fed's gon na be a little bit slower. They're, also expecting a muted policy response to inflation, just kind of wait. A lot of wait and see they do expect covet strains just future ones and omicron to delay, but not derail the restart of our economy, they're, saying short term.

They think uh that any slower growth that we end up having right now will just lead to more growth in the future, so they're kind of, like ah we're sticking long equities like even if things take a little longer we'll be fine. We'll have those shares for the future is what they're saying they say that we're dealing with this unique series of events, which we really have no historic parallels for, that we have this unique restart with new virus trends and this weird central bank policy that we're going Through but they do prefer developed markets over emerging markets, they're not too confident in emerging markets and if you look at emerging markets like brazil, 10 plus percent inflation, currency instability in turkey kind of makes sense, so they're underweight on bonds for our market, but overweight equities, Like, in other words, more stocks, please less bonds and we're sticking to domestic in 2022, that's for uh blackrock. They also mentioned that inflation is being driven by an unusual restart of dynamics of the supply and demand imbalances. Basically, like hey, we still got massive demand, but we've got a lack of supply, but they actually expect a lot of the issues are going to resolve in 2022.

Some companies aren't that optimistic, they're they're telling investors wait until 2023, which, if we do end up solving our supply chain issues in 2022, then that should be bullish for the stock market, because a lot of the stock market is not thinking that things are going to Be solved in 2022, i think some things will get a little bit better, but not great. The fed is also tapering bond purchases by 50, 15 billion dollars uh more per month. They doubled that. Obviously we know that.

Blackrock also says that you can't ignore the fact that china is slowing down and they hope that china will loosen some of its monetary, fiscal and regulatory policies to help maintain growth. But right now there's a clear lack of growth in china, and this is leading to that kind of sell-off that we're seeing on chinese stocks like alibaba. This is, of course, compounded by the fact that you've got a lot of de-listing fears with companies like dd, and that makes people scratch their heads. Okay.

What does this mean for neo? What does this mean for alibaba? So there's there's a lot of pain here, but overall they're bullish. They also think that a green transition comes at a cost of higher inflation and again they're favoring developed markets for that green transition. So we learned a lot of things in this. Let me give you a quick summary: people are bullish on the s p 500 on average, but barely like 4.6 percent jpmorgan says the january effect could be a big deal, especially for smaller caps.

When we look at the first few rate, increases for the fed might not hurt us that much especially if the fed is pretty chill. We might have already priced that pain in and a blackrock, not too bullish on developing countries, not too bullish on china. Much more bullish on american stock, so this gives you a little bit of a recap of what's going on here, combined with some thoughts on options and, of course, my thoughts on that small cap recovery. I really think we're not going to see a small clap recovery either until we get out of omicron, because i think people are using small caps as their hedge for honestly omicron anyway.

My thoughts check out moomoo link down below. Thank you so much for watching this. Video and folks we'll see you next one thanks, so much goodbye.