December 31, 2021

The Year of Prosperity

Book Review

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You guessed it! It's that time of the year again where we write down our resolutions. Next year (fingers crossed) I’m hoping to have a growth mindset , and where better to learn than from man’s best friend.

So to put you into the New Year spirit, here’s a picture of my dog Aurora dressed up during the holidays!

Aurora is never fearful of the future despite being in the face of so many uncertainties. To her, all that matters is her desire to make the people around her happy and to never let any negative influences affect her.

A concept well explored in a book and documentary called “Think and Grow Rich” by Napoleon Hill.
So turn on your lamp and get comfy as we journey through one of the minds of history's most influential and successful individuals.

Edwin C Barnes

A man named Edwin. C. Barnes had the burning desire to become Thomas Edison’s business partner but did not have the connections nor the background to achieve this.

So he took all of his savings and bought himself one train ticket to meet with Edison and upon meeting his assistant Barnes was immediately rejected to meet with him. However, his desire and leaving himself no way for retreat caused him to never take ‘no’ for an answer and so for weeks he constantly made many attempts.

Finally surrendering, the assistant allowed Barnes to meet with Edison and Barnes went right inside and requested that he take any lowly job that was available. Edison accepted.

Five years passed and Barnes was still working a low position job until an opportunity arose. One of Edison’s inventions had a marketing issue that caused his shareholders to lose faith in his invention. But Barnes never lost faith . The day he heard, he rushed home after his shift and began to work on a marketing pitch for Edison’s invention. The next day Edison accepted and the rest was history.

Edwin C Barnes with Edison
Source: Bridgetostrength.com

Much like Barnes, this year there were many hurdles that were thrown our way. We had to go through many Covid variants, China’s real estate crisis, persisting supply chain disruptions, inflationary scares and the list just goes on.

Yet like Barnes, it made us stronger and who knows what opportunities are right around the corner next year going into 2022. So in honor of Barnes, let's see what may potentially arise going into next year.

Reminiscent of 2018

As of lately choppiness in the market seems to be the status quo and going into 2022 investors are wary of a potential recession scare , which is denoted by the 10-2 Year Treasury Yield Spread.

Yet most interestingly, the events today seem to somewhat parallel the events following the December 2018 dive , where uncertainty in global factors spooked investors.

So with a potential economic slowdown in China on the horizon, is it likely that the events today could mirror a 2018 pullback in the market? Well, kind of.

I believe that the possibility of a pullback could occur but not to the levels displayed in 2018. Unlike 2018 where the uncertainties of economic slowdown were more concrete due to the trade war, we actually have present economic growth factors that could offset the uncertainties that investors have. The most notable factor being the unemployment rate going back to pre-pandemic levels of 4.2%.

Therefore, assuming that our vaccination efforts are successful and the effects of Omicron are minute, the current market pullback could potentially provide investors with the opportunity to buy the dip.

But that's not all. When the 2-10 Treasury yield spread goes down it can also signal optimism that investors are expecting inflation to lessen.

Going into next year we could see improvements that may reduce inflationary pressure in the US economy. One of the factors being a shift in consumer spending that prioritizes assets over goods and services , which I covered in my last note .

But at the end of the day, the severity and spread of Omicron is going to be an important factor to watch moving into 2022. Back home in Indonesia, the Jakarta Post reported new Omicron cases in Jakarta , and while it may be alarming, epidemiologists from Oxford have suggested that Omicron could also potentially signal the end of the pandemic . Yet moving forward to 2022, there is still insufficient data to confirm the severity of Omicron.

Who knows what we’re going to see next year. We could witness the end of the Covid pandemic where covid-19 just becomes an endemic illness or perhaps finally receive a period of reduced economic volatility, as far as I’m concerned it could also even be both.

So my suggestion, in the face of so many uncertainties at the end of 2021, is just to relax and enjoy the holidays . Just like Barnes, we will never know when the opportunity is going to come, but what we can guarantee is that when it comes we will all be prepared.

Happy New Year!

Cheers,
Reagan Narindra
Sucor Sekuritas

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