2022 has the necessary ingredients for a year of high volatility, where the dominance of bulls may no longer be overwhelming, as it has been practically since the lows of 2009, defying all predictions at the time for the maximum duration of a bull market, which is true which had some setbacks along the way, but if we don’t count the COVID pandemic flash crash, the path has been predominantly ascending, without large pockets of correction, both in dimension and time, quite different from the periods of downturns derived from the bubble of dot.com and the financial crisis.
For the bulls, we have the fact that the market behaves relatively well at the beginning of the normalization of monetary policy by the Fed, that is, until at least 1% interest is reached, statistically the US indices have behaved well, first because the central bank’s hawkish move has been derived from the robustness of the economy. Furthermore, despite the scheduled end of asset purchases, the only thing that is certain is that the Fed alone has a balance of more than $8.66 trillion, which is still less than the ECB’s $9.6 trillion, but the avalanche of liquidity does not stop there, as it is very close. are Bank of Japan and Bank of China with $6.4 trillion and $6.2 trillion.
This mountain of liquidity is not going to disappear anytime soon, indeed it will continue to increase this year, which could restrict the bears’ job of taking over the market. Bears who on their side have uncertainty about the next developments of the pandemic and inflation, not to mention the market multiples with which the equity segment has traded in recent years, well above all averages.
But regardless of the final 2022 outcome, it should strive for greater balance between the two sides of the barricade, which will trigger volatility and open new ground for intraday trading, as well as short-term swing trading.
