Low multiple, cash flow-rich Technology names such as IBM (tkr: IBM), Oracle (tkr: ORCL) and SS&C Technologies (tkr: SSNC) are well positioned for an Equity Market that will likley prove bumpy in 2022 as the Fed tightens.
We expect CPI figures in the 5-6% range throughout 2022 and 4-5% in 2023 as a result of the loose fiscal and monetary policy of 2020 and 2021. Many producers that absorbed input cost increases in 2021 will begin to pass those costs on to customers in 2022. In addition, the Biden Administration’s Infrastructure spending program will add fuel to the inflation fire over the next decade as that program’s spending comes online in 2022. The Fed accelerating its taper effort and increasing rates 2-4 times next year will do little to curb inflation. The Fed’s modest tightening will however hammer high-multiple growth stocks next year, many of which are 60-80% overvalued in our view. Crypto currencies, NFTs, housing prices and other Fed-driven bubbles will finally pop as the Fed modestly tightens. We expect the Fed Funds Rate to end 2022 at 1.00% and to end 2023 at 2.00-3.00%.