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‘Dr.Doom’ Warns Of “Clouds Over 2022”

‘Dr.Doom’ Warns Of "Clouds Over 2022"

Authored by Nouriel Roubini via Project Syndicate,

Although major economies and markets fared well in 2021 despite all of the uncertainties surrounding new variants of the coronavirus, 2022 will bring…

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'Dr.Doom' Warns Of "Clouds Over 2022"

Authored by Nouriel Roubini via Project Syndicate,

Although major economies and markets fared well in 2021 despite all of the uncertainties surrounding new variants of the coronavirus, 2022 will bring new challenges. In addition to central banks shifting toward policy normalization, geopolitical and systemic risks are multiplying.

Despite dips and disruptions from new variants of COVID-19, 2021 turned out to be a relatively positive year for economies and markets in most parts of the world. Growth rose above its potential after the severe recession of 2020, and financial markets recovered robustly. This was especially the case in the United States, where stock markets reached new highs, owing partly to the US Federal Reserve’s ultra-loose monetary policy (though central banks in other advanced economies pursued radically accommodative policies of their own).

But 2022 may be more difficult. The pandemic is not over. Omicron may not be as virulent as previous variants – particularly in highly vaccinated advanced economies – but it is much more contagious, which means that hospitalizations and deaths will remain high. The resulting uncertainty and risk aversion will suppress demand and exacerbate supply-chain bottlenecks.

Together with excess savings, pent-up demand, and loose monetary and fiscal policies, those bottlenecks fueled inflation in 2021. Many of the central bankers who insisted that the inflationary surge was transitory have now conceded that it will persist. With varying degrees of urgency, they are planning to phase out unconventional monetary policies such as quantitative easing, so that they can start to normalize interest rates.

Central banks’ resolve will be tested if policy-rate hikes lead to shocks in the bond, credit, and stock markets. With such a massive build-up of private and public debt, markets may not be able to digest higher borrowing costs. If there is a tantrum, central banks would find themselves in a debt trap and probably would reverse course. That would make an upward shift in inflation expectations likely, with inflation becoming endemic.

The next year also brings mounting geopolitical and systemic risks. On the geopolitical front, there are three major threats to watch.

  • First, Russia is preparing to invade Ukraine, and it remains to be seen whether negotiations on a new regional security regime can prevent escalation of the threat. Although US President Joe Biden has promised more military aid for Ukraine and threatened harsher sanctions against Russia, he also has made clear that the US will not intervene directly to defend Ukraine against an attack. But the Russian economy has become more resilient to sanctions than it was in the past, so such threats may not dissuade Russian President Vladimir Putin. After all, some Western sanctions – such as a move to block the Nord Stream 2 gas pipeline – could even exacerbate Europe’s own energy shortages.

  • Second, the Sino-American cold war is getting colder. China increasing its military pressure on Taiwan and in the South China Sea (where many territorial disputes are brewing), and the broader decoupling between the Chinese and US economies, is accelerating. This development will have stagflationary consequences over time.

  • Third, Iran is now a threshold nuclear state. It has been rapidly enriching uranium to near-weapons grade, and the negotiations over a new or refurbished nuclear agreement have gone nowhere. As a result, Israel is openly considering strikes against Iranian nuclear facilities. Were that to happen, the stagflationary consequences would likely be worse than the oil-related geopolitical shocks of 1973 and 1979.

The new year also brings several systemic concerns.

In 2021, heatwaves, fires, droughts, hurricanes, floods, typhoons, and other disasters laid bare the real-world implications of climate change. The COP26 climate summit in Glasgow offered mostly cheap talk, leaving the world on track to suffer a devastating 3° Celsius of warming this century. Droughts are already driving a dangerous spike in food prices, and the effects of climate change will continue to worsen.

Making matters worse, the aggressive push to decarbonize the economy is leading to underinvestment in fossil-fuel capacity before there is a sufficient supply of renewable energy. This dynamic will generate much higher energy prices over time. Moreover, climate refugee flows toward the US, Europe, and other advanced economies will surge just as those countries are shutting their borders.

Against this background, political dysfunction is increasing in both advanced economies and emerging markets. The US midterm elections may offer a preview of the full-blown constitutional crisis – if not outright political violence – that could follow the presidential vote in 2024. The US is experiencing near-unprecedented levels of partisan polarization, gridlock, and radicalization, all of which poses a serious systemic risk.

Populist parties (of both the far right and the far left) are growing stronger around the world, even in regions like Latin America, where populism has a disastrous history. Peru and Chile both elected radical leftist leaders in 2021, Brazil and Colombia may follow suit in 2022, and Argentina and Venezuela will remain on a path to financial ruin. Interest-rate normalization by the Fed and other major central banks could cause financial shocks in these and other fragile emerging markets such as Turkey and Lebanon, not to mention the many developing countries with debt ratios that are already unsustainable.

As 2021 draws to a close, financial markets remain frothy, if not outright bubbly. Public and private equity are both expensive (with above-average price-to-earnings ratios); real-estate prices (both housing and rent) are high in the US and many other economies; and there is still a craze around meme stocks, crypto assets, and SPACs (special purpose acquisition companies). Government bond yields remain ultra-low, and credit spreads – both high-yield and high-grade – have been compressed, owing partly to direct and indirect support from central banks.

As long as central banks were in unconventional policy mode, the party could keep going. But the asset and credit bubbles may deflate in 2022 when policy normalization starts. Moreover, inflation, slower growth, and geopolitical and systemic risks could create the conditions for a market correction in 2022. Come what may, investors are likely to remain on the edge of their seats for most of the year.

*  *  *

Our newest magazine, The Year Ahead 2022: Reckonings, is here. To receive your print copy, delivered wherever you are in the world, subscribe to PS for less than $9 a month.  As a PS subscriber, you’ll also enjoy unlimited access to our On Point suite of premium long-form content, Say More contributor interviews, The Big Picture topical collections, and the full PS archive. SUBSCRIBE NOW

Tyler Durden Wed, 12/29/2021 - 16:20

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Spread & Containment

VIRI: Enrollment Complete in FORTRESS Trial; Results Expected in September 2022…

By David Bautz, PhD
NASDAQ:VIRI
READ THE FULL VIRI RESEARCH REPORT
Business Update
FORTRESS Trial Fully Enrolled; Topline Results in September 2022
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By David Bautz, PhD

NASDAQ:VIRI

READ THE FULL VIRI RESEARCH REPORT

Business Update

FORTRESS Trial Fully Enrolled; Topline Results in September 2022

On April 28, 2022, Virios Therapeutics, Inc. (NASDAQ: VIRI) announced that it has completed enrollment of 425 fibromyalgia patients into the Phase 2b FORTRESS (Fibromyalgia Outcome Research Trial Evaluating Synergistic Suppression of Herpes Simplex Virus-1) trial, a randomized, double blind, placebo controlled study of IMC-1. The primary endpoint of the trial is reduction in pain and secondary endpoints include change in fatigue, sleep disturbance, global health status, and patient functionality (NCT04748705). An outline of the trial is shown below.

In parallel with the FORTRESS trial, Virios is continuing the chronic toxicology studies of IMC-1 in two animal species. The results of these studies are required by regulators before Virios will be allowed to dose patients for one year or more, which is the plan for the Phase 3 program. The results of the chronic toxicology studies should be known around the time of the completion of the FORTRESS trial, thus the company should be able to move into a final Phase 3 program following completion of the current study, pending positive results.

Testing Combination Antiviral Therapy for the Treatment of Long COVID

In February 2022, Virios announced a collaboration with the Bateman Horne Center (BHC) to test combination antiviral therapy for the treatment of Long COVID. Following an infection with SARS-CoV-2, the virus that causes COVID-19, approximately 30% of patients will experience symptoms that last for weeks or months, which is referred to as Long COVID. The range of symptoms varies from patient to patient, however the most commonly reported (from a recent meta analysis) were fatigue (58%), headache (44%), attention disorder (27%), hair loss (25%), and dyspnea (24%) (Lopez-Leon et al., 2021).

The main theories for what might be causing ...

Full story available on Benzinga.com

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Stocks

Global financial regulators will discuss crypto at G7: Report

Bank of France Governor François Villeroy de Galhau reportedly said that the recent crypto market volatility had been a “wake-up call” for global…

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Bank of France Governor François Villeroy de Galhau reportedly said that the recent crypto market volatility had been a “wake-up call” for global regulators.

Central bank governors and finance ministers from the Group of Seven, or G7, are reportedly planning to discuss the regulation of cryptocurrencies.

According to a Tuesday report from Reuters, Bank of France Governor François Villeroy de Galhau said representatives from the United States, Canada, Japan, Germany, France, Italy, and the United Kingdom will likely speak on issues related to a regulatory framework for cryptocurrencies at a meeting in Germany's cities of Bonn and Königswinter starting on Wednesday. Villeroy reportedly said that the recent crypto market volatility — likely referring to some stablecoins depegging from the U.S. dollar and prices of major tokens dropping — had been a “wake-up call” for global regulators.

“Europe paved the way with MiCA,” said Villeroy at an emerging markets conference in Paris, referring to the European parliament’s legislation aimed at forming a regulatory framework on crypto. “We will probably [...] discuss these issues among many others at the G7 meeting in Germany this week.”

The Bank of France governor added in a speech to the Emerging Market Forum in Paris on Tuesday:

“Crypto assets could disrupt the International Financial System if they are not regulated, overseen and interoperable in a consistent and appropriate manner across jurisdictions.”

According to the G7 website, finance ministers and central bank governors will meet in Germany from May 18-20 to discuss policies related to member nations’ recovery and financial stability due to the COVID-19 pandemic, “shaping the upcoming transformation processes in the context of digitalisation and climate neutrality,” and business policy at the International Monetary Fund. The group issued guidelines around the possible rollout of central bank digital currencies in 2021, and reportedly warned that certain stablecoins could threaten the global financial system in 2019.

Related: Bank of Japan official calls for G7 nations to adopt common crypto regulations

Villeroy has previously urged EU officials to develop a regulatory framework given crypto’s growing role in regional markets, saying they only had “one or two years" to act. Prior to his election victory in France, Emmanuel Macron said he supported the European parliament's recent efforts to regulate crypto — including MiCA — adding that any rules should not hinder innovation.

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Bonds

Best Stocks to Buy in a Bear Market: Your Complete Guide

To protect your portfolio this year, keep reading to find the best stocks to buy in a bear market and how they can still earn you a profit.
The post Best…

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Stocks fell again last week, making it six straight weeks of fallout. Everything is slipping from its highs between stocks, bonds and the latest victim, crypto. With this in mind, if you wish to find the best stocks to buy in a bear market, there are several factors to consider first.

For one thing, the Federal Reserve is committing to using all the tools necessary to bring down the price of goods. Although the pace of inflation is slowing, prices are still on the rise.

The latest Consumer Price Index (CPI) reading shows prices rose another 0.3% in April. Furthermore, as the fed works to get inflation under control, Chairman Jerome Powell is warning there could be more pain ahead.

Several analysts are cutting their economic predictions as a result. For example, Former Goldman Sachs CEO Lloyd Blankfein suggests a recession may be in the works. On CBS’s “Face the Nation,” he mentions “there’s a path” to a recession, and taming inflation will be tricky. If you wish to protect your portfolio this year, keep reading to find the best stocks to buy in a bear market and how they can still earn you a profit.

What Are the Best Stocks to Buy in a Bear Market?

The first thing to consider is not all bear markets are the same. They can appear out of nowhere, often caused by a black swan event such as the pandemic.

At the same time, bear markets are a natural part of investing. In a way, they can help correct valuations, allowing investors to build long-term wealth. For example, the S&P 500 (SPX) P/E ratio is around 20, down from 38 in December. Yet the value is still higher compared to its historical average of 15.

However, they can also be detrimental if you are not prepared. There are a few things to look for to find good stocks to invest in during a recession, such as…

  • Dividends
  • Sales Growth
  • Free Cash Flow

On top of this, how the stock performs relative to its peer can help you identify leaders. If a stock is trading above its 200D SMA while its peers are slipping, it’s generally a sign of strength and momentum. To get your portfolio ready for what’s next, check out the best stocks to buy in a bear market.

No. 4 Consumer Defensive

When inflation is high, it makes goods more expensive, reducing consumers’ purchasing power. Although this is true, people still need their essentials. With this in mind, the consumer defensive sector consists of companies that make essential goods such as household essentials, tobacco and food.

Kroger (NYSE: KR)

Kroger is one of the largest food retailers in the U.S., with close to $138 billion in sales in 2021. Despite growing inflation and wage pressure, the grocer continues growing at an impressive rate. Lastly, with many locations having pharmacies and fuel centers, Kroger’s margins shouldn’t see too much pressure as food and wage prices continue climbing.

Boston Beer Co. (NYSE: SAM)

Sticking with the theme of industry leaders, Boston Beer is a top brewing company in the U.S. with brands such as Sam Adams, Twisted Tea and Truly. Although the brewer saw sales decline in the first quarter, its positioning itself for future growth with younger-generation favorites such as Truly hard Selzer.

Companies in the consumer defensive sector are some of the best stocks to buy in a bear market. However, as employees seek higher wages to offset inflation, we could see some short-term pressure. With this in mind, both companies are fundamentally solid while positioned for future growth.

No. 3 Healthcare Stocks

Healthcare is an investor’s favorite industry when the economy is slowing. For one thing, healthcare is an industry with stable demand. To explain, consumers have healthcare plans, and people will still get sick. Not to mention patients still need to take their medication.

One of the last things people will cut out of their budget is healthcare. As a result, the industry sees relatively stable earnings. That said, the Health Care Select Sector SPDR Fund (NYSE: XLV) is down 6% YTD compared to the SPDR S&P 500 ETF (NYSE: SPY), down 15%.

CVS Health (NYSE: CVS)

During the pandemic, CVS transformed its business to meet the changing industry needs. By providing affordable, convenient, and personal care, CVS is seeing the results pay off. In Q1, health care benefits, pharmacy sales, retail, and store visits rose significantly as a result. Even more, the company is raising guidance for 2022.

Mckesson (NYSE: MCK)

As the largest pharmaceutical distributor in the U.S., Mckesson plays a critical role in healthcare. Although exiting international markets may slow growth in the short term, an aging U.S. population and more access to healthcare should promote higher sales.

Both CVS and Mckesson have strong free cash flow, pay dividends, and are trading above their 200D SMA.

No. 2 Materials and Miners

Materials and mining companies are some of the best stocks to buy in a bear market with tangible value. Mining companies extract resources such as metals, selling them to be made into goods. Other materials firms can include chemicals, packaging and agricultural goods.

Mosaic (NYSE: MOS)

One of the largest fertilizer nutrient producers looking to fill the supply gap left by the war in Ukraine. Furthermore, a tight agriculture market is driving prices higher, resulting in over 300% operating earnings growth. Lastly, crop prices are likely to remain elevated this year with growing sanctions and lack of supply.

Alcoa Corp. (NYSE: AA)

The world’s largest bauxite miner plays a vital role in the aluminum market. Bauxite is used to produce alumina, then used to make aluminum. With demand for aluminum expected to remain elevated (especially as automakers pick up again), Alcoa rewards shareholders with a new dividend and increased buyback program.

Another key thing to consider is the Infrastructure Investment and Jobs Act intended to rebuild and replace America’s roads, bridges, etc. Many of these projects will require significant resources such as steel, iron, and other construction materials. With this in mind, the bill states these materials must be domestic.

No. 1 Best Stock to Buy in a Bear Market: Energy Stocks

This year, energy stocks are outperforming the market, and it’s not even close. The Select SPDR Trust Energy ETF (NYSE: XLE) is up 48% so far in 2022. Yet the sector doesn’t look to be slowing anytime soon.

Devon Energy (NYSE: DVN)

The number one performing stock in the S&P 500 last year looks to continue its reign. With oil prices over $114 a barrel, Devon Energy is seeing profits soar as operating cash flow rose another 14% in Q1 to $1.8 billion. With this in mind, the company is returning profits to investors through a record $1.27 dividend (nearly 8% yield) and a massive $2 billion share buyback.

Chevron (NYSE: CVX)

The second-largest oil company in the U.S. (behind Exxon) is ramping spending to boost production. After several smart partnerships and acquisitions, Chevron is investing in growth. So far, the strategy is paying off as the company becomes more efficient and profitable. Lastly, Chevron’s focus on a lower carbon future with renewable energy investments will likely prove to be a smart bet in the long run.

As many nations look to phase out Russian oil, other companies are stepping up to increase production and fill the supply gap. The economy is largely dependent on oil and gas to continue running smoothly. People will still need gas and oil to power their homes, get to and from work, etc.

Given these points, energy stocks are on the top of my list of best stocks to buy in a bear market. Even though energy is outperforming this year, they have more room to run. To explain, energy makes up only about 4.5% of the S&P 500, even after running up this year. However, it’s still relatively low compared to its historical average of around 10%.

The post Best Stocks to Buy in a Bear Market: Your Complete Guide appeared first on Investment U.

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