The Great 2021 Year in Review Plus 2022 Outlook

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2021 Winners:

Cyclicals and Crypto

2021, the year of the great reflation, approaches its end. Who won the day in equities? Cyclicals mainly, meaning Financials and Energy. Not that the Nasdaq did poorly. And in the long view, it still dominates performance. And of course BioTech had the year of death. Can it get much worse?

But the real winner, even in December with sentiment falling into the sea, was Crypto as an asset class. Specifically Ethereum and other adjacent protocols and layers (SOL, MATIC, AVAX, etc). Though even OG Boomer Coin Bitcoin outperformed cyclicals.

2022 Risks and Opportunities:

So where do we rotate in 2022?

Let's start with equities. With this week's FOMC, Jerry confirmed the end of the party, with 3 rate hikes and double the pace of tapering in the offing.

Which puts cyclicals back in the lead, and risk assets out in the cold.

Primary risks & opportunities :

The party really is over: With the Fed incrementally hawkish, and a historic run for risk assets behind us, we might see the risky, degenerate order of the day cool-off as Millennials and Gen Z exchange assets for fiat and buy houses. 

The Fed missteps: Maybe it's another taper tantrum or worse, raising rates in the midst of a historic debt cycle. But the Fed is the backstop for everything. Should they incite a panic, however, it would present a buying opportunity as the Fed are forced to step in.

Crypto on the knife's edge: Will 2022 be the capital tsunami of institutions buying Bitcoin, or the death of retail sentiment leading to another Crypto winter? I have no idea.