Need to Know: These wild market forecasts have a 50% chance of happening in 2022, says hedge-fund investor

Read: Here’s when the stock market is open during the Christmas/New Year’s Eve holidays

In our call of the day, we’re swerving into “what if” land with a note from Doug Kass, president of hedge fund Seabreeze Partners Management. “Like Diogenes with his lantern, I am, again in 2022, a cynic looking for truth — as I engage in my annual assault on the consensus and ‘Group Stink,’” writes Kass.

He shares a list of 15 surprises (highlighted and condensed below), that he stresses aren’t forecasts, but “events that the consensus views as having a low probability of happening (25% or less) but, in my judgment, have a better than 50% chance of occurrence.” Betting folks would call this an overlay, he says.

1. Both President Joe Biden and former President Donald Trump fall into ill health, with both out of the current and future White House picture. After a lame-duck takeover by Vice President Kamala Harris, Republican Nikki Haley, Trump’s daughter Ivanka and Democrat Hillary Clinton put their names forward for 2024.

2. Federal Reserve Chair Jerome Powell turns hawkish, but acts too late for rising inflation. Global reopenings help push oil over $110 a barrel, supply-chain problems linger, and wages surge. The economy enters “slugflation” (sluggish growth, sustained inflation) with debt burdens and housing shortages.

3. The stock market rolls over after rallying to new high in early 2022. So-called innovations stocks that “performed poorly in 2021, all but collapse in 2022,” with the ARK Innovation ETF trading under $70 a share. Private and public companies tighten their belts, trimming ad spending, which hits Meta, Alphabet and Amazon. Cryptos are also hit by drawdowns. Later in the year, amid a slowing economy, higher inflation and aggressive Fed, a full-on bear market takes the S&P down 30% from early year highs. 

4. Amazon also runs into labor and shipping costs, while Tesla’s shipments and market share are adversely hurt by competitive electric-vehicles. Then…”EVs lose their luster and appeal as it becomes clear that the electric grid is nowhere near ready for a mass switch…nor is your home.” This also hurts players GM and Ford.

5. Elsewhere the bear market forces a Robinhood sale to JPMorgan for just $2 a share, the same price paid for Bear Stearns in the 2008-09 financial crisis. As for the winners, value shares materially outperform growth stocks and silver becomes a new meme stock. Cannabis names surge as two major players merge and a third gets bought by a U.S. packaging company.

Happy and safe holidays to all, and we’ll be back Monday.

The buzz

Adding to a recent positive newsflow surrounding the fight against omicron, AstraZeneca
AZN,
+2.00%
said its COVID-19 booster appears effective against the new coronavirus variant. Similar comments from Novavax
NVAX,
-4.07%
about a study of its COVID-19 vaccine booster is lifting those shares in premarket.

Higher COVID-19 cases force China to lock down 13 million people in the city of Xi’an, the U.K. passed more than 100,000 cases on Wednesday and Spain will reimpose wearing masks outdoors amid record daily infections. The World Health Organization has warned that “no country can boost its way out of the pandemic.”

President Joe Biden said provided he’s in good health, he’ll run for re-election in 2024, in an interview.

A day after saying he had “sold enough” Tesla
TSLA,
+7.49%
stock, sparking a rally that pushed the electric-car maker back into the $1 trillion market-cap club, CEO Elon Musk sold another 934,000 shares.

Several people have been reported injured after a fire at an Exxon
XOM,
+0.81%
oil refinery in Texas.

Weekly jobless claims, personal spending and core inflation and durable goods orders are all due ahead of the open. New-home sales and the final University of Michigan consumer sentiment index will follow.

China social-media group Tencent
700,
+4.24%
will shed most of its JD.com
JD,
+0.46%
stake, with plans to distribute around $16.4 billion worth to investors via a one-time dividend.

Delivering his annual address, Russian President Vladimir Putin accused the west of “coming with its missiles to our doorstep,” expressing anger at Nato expansion, and saying he’d intervene in Ukraine if needed.

A monument marking the 1989 Tiananmen Square massacre was removed at a Hong Kong university. One photo showing workers taking down that statue is going viral:

The chart

The so-called Santa Claus Rally takes place on the last five trading days of December, and the first two of January. Fundstrat Global Advisors, who provide this hourly chart of the S&P 500 showing a range seen since mid-November, say the broader market needs to recover and show similar strength as that index.

“Prices are now getting up towards the highs of this pattern, but yet will need to eclipse 4732 to think Santa’s on his ‘merry way.’ Meanwhile, any reversal from here also can’t afford to fall under 4614 which would lead to a break of December lows,” say Fundstrat in a note.

Opinion: Santa Claus gives you attractive odds of a stock market rally

The markets

Stock futures
ES00,
+0.32%

YM00,
+0.33%

NQ00,
+0.25%
are going nowhere, though Wednesday’s rally dragged Asia
000300,
+0.70%

NIK,
+0.83%
higher, and European equities
SXXP,
+0.62%
are tracking those gains. Elsewhere, the dollar
DXY,
+0.10%
and gold
GC00,
+0.19%
are up, and Treasury yields
TMUBMUSD10Y,
1.477%
are ticking up.

The tickers

These are the most active tickers on MarketWatch as of 6 a.m. Eastern Time.

Random reads

Nine days after a deadly tornado in Kentucky, Madix the cat is found alive.

“You smell like beef and cheese.” The hard job of a Santa impersonator.

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