Bears and Bulls - 2022, a year to remember.

After leaving a pandemic, we enter on a new turbulent geopolitical world! Conflicts and strong political swings across all continents have incremented the deep impact created by the COVID-19 period.

No doubt, the stock market is a simple, public and often perfect mirror of reality, specially for those that believe and the perfect market theory. Asymmetries apart, of course.

I always remember a say from my father, which points out that "Capital is the scariest of all animals, on the slightly signal of fear or uncertainty, it runs away and disappears".

All world is suffering (graph above)! No doubt the first wave of the pandemic has affected all world as a big car-break on economic activity, rising the uncertainty on how to behave and fight the virus. Certain countries showed more resilience, with a rapid recovery, but during the subsequent waves, most of the countries have injected stimulus into the Market, creating huge debts.

Now, inflation is the enemy of the world, which some countries are more prompt to a correct response, while others are taking steps that are either slow or too harsh. Not easy to live in an inflationary period. My personnel experience, as a kid has been super traumatic - Brazil had up to 80% monthly inflation, what characterizes a hyperinflation.

Balance Inflation and Growth is a difficult task! Responses vary, but there are traps: increase in yield rates, which draw liquidity from the markets, can cause the stagnation of the economy, which in along with the inflationary forces create a monster called staginflation. The ultimate symptom: high unemployment!

There is another problem coming specific from 2022, also partially an inherence from COVID-19: the internalization of all productive value chain. Initially thought out due to the problem created to assure vaccines around the globe, as some developed countries did not have the necessary laboratories nor specialized personnel and infrastructure to produce their own vaccines.

Then came the European conflict! Now Energy is the main element causing pricing to go up! We need energy! Without it, a substancial part of the world cannot eat. And Energy consumption just grows, as progress is spreading around the world.

Tight the belt and secure for the bumpy winter! As a the Motto of the House Stark: "Winter is coming".

But I am optimistic, and hope the policymakers take the steps necessary to stop the conflict, secure energy and estabilize the Capital Markets. So, the Capital Animal shows up again, and employment is created, growth and consumption resumes and the Stock Market comes back from its Bear mode. Yes, I know, it is a big wishlist!