10 predictions about the future of the economy and markets

10 predictions about the future of the economy and markets (I’m a twitter economist – so treat with fist of salt) 🧵
1. Indian Markets will remain choppy with a downward trend for most of 2022. Foreign investors will continue to exit as the global money tap dries. Domestic investors will likely stay invested providing a cushion. Also, there will be few alternate asset classes left.
FDs won’t be attractive post inflation. Bonds will continue to fall with rising interest rates. Real estate will fall with increase in lending rates. Global markets in any asset class will be far far worse.
2. Indian Markets will rebound sometime middle of next year (say May or June), once people realise the huge comparative value of India and global gales temper. It will be an uneven recovery with safer companies outperforming hugely.
3. Equity markets will violently veer towards profits again. Loss making innovators (even those with credible stories) will be punished. Bluechips (and stodgy public sector) will remain the best option right through the end of 2023, possibly end of 2024.
4. Private equity markets (incl VCs) will hurt the most as the valuation game of passing the parcel will end for a long long time (4-5 years). Conservative funds (yes, both of them) will of course be ok.
5. India’s GDP growth will temper below 7% for ‘22 to 23 as we are not immune from the global economic gales. And boy, will there be solid gales!
6. Western economies will have a long long recovery, not before end of 2024 or middle of ’25. Whether there will be a big bust or a slow impact on the economy and asset prices is unclear.
The western world will meet rising interest rates after nearly 4 decades. People today are underestimating the impact of that on the economy.
7. For what remains of the decade, it will be India’s decade, with solid growth, (possibly) privatisation, labour productivity improving, land reforms. Cost of capital will be hard though for the first few years. For profitable and bootstrapped companies life will look good.
8. Oil is subject to analysis by extrapolation (like most analysis). I believe oil will head back to ‘normal’ levels by early next year (war or end of war). Whether normal means 50$ or 75$ I don’t really know.
Food prices are much more unpredictable and given the long gestation period, food prices will likely be elevated in 2022 and 23, even if one were to assume the war would end soon.
9. IT woes (I mean supply chain issues) will continue till the middle of or end of next year. This will continue to have an impact on productivity of manufacturing (think heavy tools which require chips).
10. Finally, to summarise, this is not a regular up and down market cycle. This will last long and will be brutal to those not prepared.
The era of making free money from asset classes has ended for many years (do expect some returns from safe investments). Bye NFTs and JPGs. You had your day. Stay safe and work hard (in your real job).

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