So far, 2022 is a year that almost everyone on Wall Street has predicted wrongly. The same is true for officials from the Federal Reserve and global central banks.

Inflation brings more and more turmoil, and investors have nowhere to hide.

So far, 2022 is the year Wall Street that almost everyone predicted wrong . The same is true for officials of the Fed and global central bank .

In December last year, strategists from top investment banks in the world such as JPMorgan Chase predict that S&P 500 index will rise 5% in 2022. Economists expect that by the end of this year, the yield on the 10-year Treasury bonds will reach 2% on average. Even Goldman Sachs also proposed that Bitcoin may rise to $100,000.

However, six months later, a series of unprecedented shocks jointly ended the strongest round of stock market bull market , causing the safe-haven government bond yield and other asset prices to spiral up. The S&P 500 fell 23%, the 10-year Treasury yield rose to 3.23%, and the value of Bitcoin was more than half.

market has rapidly changed from "buy everything" to "sell everything". For many years, the argument of "no choice, only stock " (TINA) has now faded. In addition, unforeseen events such as the Russian-Ukrainian conflict have also led to the highest inflation in 40 years. The result is essentially the basis of the post-epidemic rebound—the ultra-low interest rate and monetary stimulus—disappeared as the Federal Reserve and other central banks in the world seek ways to curb inflation.

London investment director James Athey said:

" in the foreseeable future, this is definitely the end of TINA. Under the inflation rate of 33, the actual return of the stock market is not very attractive."

Even Fed Chairman Powell did not see the turmoil brought by inflation. He had previously predicted that by the end of 2022, the price increase of will drop to a long-term target of closer to the Fed's 2%. But now, as the Federal Reserve's aggressive rate hike measures pose a risk to economic growth, the bond market is sending recession signals.

Deutsche Bank strategist Jim Reid said:

" At this time last year, the Federal Reserve still expected interest rates to be near zero at this time. Now, in less than half a year, this 'pointer' points to 2022 will reach 3.5% by the end of the year."

Some experts are waiting for the stock market to recover

However, even if the stock market falls sharply, some experts still believe that the stock market will recover before the end of this year.

analyst JohnStoltzfus still believes that S&P 500 will close at 5330 points by the end of 2022, indicating that it needs to rise 45% in the next six months. Several other banks, including JPMorgan Chase and Credit Suisse , are targeting that the index will rise at least 30%. According to a latest survey by foreign media, Wall Street strategists on average expect the S&P 500 to rise 22% from last Friday's level by the end of this year.

What is certain is that people are speculating when the Russian-Ukrainian conflict will end, or when the supply chain bottleneck will ease and whether there are other factors that will increase price pressure besides the Fed's policy tightening.

But in the view of Max Kettner, chief multi-asset strategist at HSBC Global Research, compared with other asset classes, the stock market has not yet fully digested the impact of the recession. He believes:

" In short, this means that risk assets will be further weak in the summer months."

S&P 500 fell from its peak to the bottom between 2000 and 2002, a drop of 51%, and fell 58% during the global financial crisis . Therefore, Michael Wilson of Morgan Stanley pointed out that the decline in stock markets by more than 20% still does not fully reflect the risks faced by corporate profits.

It is worth noting that Wilson was one of the few people who were bearish on the stock market in 12html last March.

Investors have nowhere to hide

According to the practice in the textbook, when facing this situation, all people can do is transfer cash to safe-haven assets such as gold and US Treasury bonds. Both of these can be said to be the safest financial assets in the world, but their prices are also falling.

Both stock and bond markets are expected to usher in the worst quarter ever. At the same time, the credit market has also suffered a heavy blow.

Bloomberg data shows that the world's safest corporate debt pool has dropped by more than $900 billion so far this year, the worst first half on record. Indicators for measuring corporate credit risk are also soaring, with default swap (CDS) that insures the debt of European high-rated companies at their highest level since April 2020.

And in 2022, perhaps no other asset class has experienced such drastic fluctuations like cryptocurrencies.

Although some people called for Bitcoin to reach $100,000 earlier this year and claimed that Bitcoin could hedge against inflation, the cryptocurrency market has been downward.

Since hitting a high of nearly $70,000 last November, Bitcoin has lost two-thirds of its value . The claim that Bitcoin, the world's largest cryptocurrency, is a separate means of storage of value, has disappeared.

Meanwhile, this crypto ecosystem of miners, traders and exchanges is under increasing scrutiny due to layoffs, freezes of redemption and liquidity issues.

In this case, it is not easy to do anything right. The sharp rise and sharp decline in the market paints a bleak picture. But Kettner of HSBC said that the trigger this year was obvious. He said:

" is just like investors were obsessed with 'temporary inflation' last year. So far, the 2022's Investor obsessed with 'inflation' in the past year has always been 'inflation peaking'. But the facts have proved that inflation is not short-lived and has not yet peaked. Therefore, the past few days have been difficult."

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