This chart from Kevin Lings’ latest weekly review gave me pause. I love the Stanlib chief economist’s work mostly because of his ability to share practical investment insights from economic data. Like this week’s charts which included a comparison of US interest rate cycles with market recoveries, republished below.
In the commentary Lings says financial analysts expect US interest rates to peak in 2023 at between one and one and a quarter percentage points higher than today’s 3.75% to 4%. So while we haven’t quite reached the end of upward cycle, it’s probably within the next six months.
___STEADY_PAYWALL___History suggests that once rates peak, there will be a strong recovery in share prices. Since 1980, on average the S&P500 gained 15% in the 12 months immediately after the cycle turned. Two times since 1994, the index jumped over 30% after rates peaked.
Given the near historic plunge in US share prices during 2022, once conditions permit, a stronger than average recovery would seem logical. So for hardy souls able to ignore the volatility and prepared to take an 18 month view, today’s accumulation of the shares in top global companies could be very well rewarded.
More for you to read today:
- From bad to worse? Next year’s economic risks are already here: It’s been a miserable year for the global economy but things can always get worse. Here’s a guide to the biggest economic risks for the year ahead.
- Goldman Sachs sees significant decline in US inflation next year: Goldman expects a significant easing of US inflation in 2023 reflecting softening supply chain problems, a peak in shelter inflation and slower wage growth.
- The patronage problem of an ANC/EFF coalition. The ANC and EFF in Ekurhuleni recently failed to strike a bargain that would remove the DA from the mayoral position with Nicholas Lorimer resolute it’s all about the patronage.
- Brexit ‘permanently damaged’ UK economy. Former Bank of England policy maker Michael Saunders said Britain’s exit from the European Union is one of the reasons why the UK is now entering a period of austerity.
- China plans property rescue in latest surprise policy shift: China issued sweeping directives to rescue its property sector, adding to a major recalibration of its pandemic response in the strongest signs yet.
- New Zealand homebuyers in denial as beach allure beats rising oceans. New Zealand needs to act now to mitigate risk by investing in sea walls and other barriers to protect vulnerable communities.
- Sam Bankman-Fried fooled the crypto world and maybe even himself: Before the world began to grasp the truth about Sam Bankman-Fried, an inkling of doom began to spread through his convoluted crypto empire.
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Looking Ahead: Investing for 2024 with Alec Hogg
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Renergen’s story about turning a Free State helium and natural gas deposit into a massive profit generator attracted a horde of retail investor fans. But in recent months, Renergen’s share price has fallen 34% and at its current R27, is a world away from respected small cap analyst Keith McLachlan’s R67 valuation. The stock returned to earth after its pilot plant’s production deadline was missed – first because of Covid-lockdown related delays, then by a faulty oil heating system. CEO Stefano Marani has also had to deal with a cold shoulder from controversial mining company Ivanhoe, and leaks in Australia that aborted a capital raising exercise. On the upside, he reckons the glitches have all been dealt with and expects the pilot plant to produce its first helium soon (“not months”) – triggering funding of a massive $1bn commercial plant (half via the US government) which will potentially transform the company. Stefano spoke to Alec Hogg of BizNews.
