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4 Things You Need to Know About a Potential "Lost Decade" for Stocks: Part 2

2 0 1
15.10.2021

Today's Part 2 article features the SPY and reveals the "4 Things You Need to Know About a Potential "Lost Decade" for Stocks." Read on for all the details.

In part one of this series, we examined why Bank of America and Moody's think stocks could deliver virtually zero or even negative returns for the next decade.

Rising interest rates are the biggest risk that might make such grim forecasts into reality.

So now let's take a look at the two most important facts of all about a potential lost decade, what might cause rates to rise more than expected, and which stocks are most likely to soar, and which you should ignore if they do.

The Fed warned us that as the economy reopens from the pandemic, pent-up consumer demand combined with $3.5 trillion in excess savings, as well as pandemic supply chain bottlenecks could lead to significant transitory inflation.

Well, we've certainly gotten high inflation in recent months, with producer prices soaring over 8% YOY, and consumer prices surging to the highest level in 30 years.

The supply chain disruptions that were expected to peak in Q3 2021, and then gradually fade into 2022 and be gone by 2023, are proving more persistent thanks to several factors.

In China, more delta surges, have resulted in ongoing rolling lockdowns.

China is also facing an energy crisis created by historically low gas and coal reserves ahead of winter. This is causing rolling blackouts that is forcing many factories to shut just as US demand for holiday goods is at its peak.

Europe is also facing a historic energy crisis at the moment, with natural gas prices surging 500% and it's not even winter yet.

Oil prices have soared from -$38 in April 2020 to $81 and are climbing, and some analysts, such as BAC and Goldman, think $100 crude could be coming this year.

Morgan Stanley estimates that above $80 oil starts to drag on the US economy.

US producers, suffering from the worst decade for energy in history, are being extremely conservative with drilling spending and growth capex. Investors are tired of cumulative shale losses that the Wall Street Journal estimates at over $300 billion.

Add to this an increased focus on ESG, with European oil companies vowing to reduce production voluntarily in the coming years, and you can see why many analysts think that higher energy prices might........

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