What we’re reading (12/31)
“In A Wild Year For Markets, Stocks Pull Off Big Gains” (Wall Street Journal). “Even with the recent turbulence from the Omicron coronavirus variant, the S&P 500 saw a 27% advance for 2021 and has hit 70 highs. It is the third straight year of double-digit gains for the broad index, and the second in the midst of the Covid-19 pandemic. The Dow Jones Industrial Average and Nasdaq Composite have gained 19% and 21%, respectively, this year, helping send the major indexes to their best three-year performance since 1999.”
“Stocks Surged in 2021, As Wall Street Rolled Its Eyes At Covid” (CNN Business). “It was an incredibly resilient year for the market, with stocks continuing to rally despite an alarming uptick in cases of the Omicron variant of Covid-19 around the globe. Optimism about the effectiveness of vaccines helped fuel investor enthusiasm though, as did the steady hand of the Federal Reserve and other central banks, which have mostly pledged to tread cautiously as they look to normalize monetary policy and slowly begin raising interest rates.”
“The Fed’s Moves Pumped Up Stocks. In 2022, It May Pull The Plug.” (New York Times). “‘The nightmare scenario is: The Fed tightens and it doesn’t help,’ said Aaron Brown, a former risk manager of AQR Capital Management who now manages his own money and teaches math at New York University’s Courant Institute of Mathematical Sciences. Mr. Brown said that if the Fed could not orchestrate a ‘soft landing’ for the economy, things could start to get ugly — fast. And then, he said, the Fed may have to take ‘very aggressive action like a rate hike to 15 percent, or wage and price controls, like we tried in the ’70s.’”
“Billionaire Chamath Palihapitiya Says Visa And Mastercard Will Be The Biggest Business Failures In 2022, Losing Out To Altcoin-Linked Projects” (Insider). “‘Be short these companies and anybody that basically lives off of this 2 or 3% (transaction) tax, and be long well-thought-out, Web3 crypto projects that are rebuilding payments infrastructure in a completely decentralized way,’ he said.”
“The Hidden ‘Replication Crisis’ Of Finance” (Financial Times). “It may sound like a low-budget Blade Runner rip-off, but over the past decade the scientific world has been gripped by a ‘replication crisis’ — the findings of many seminal studies cannot be repeated, with huge implications. Is investing suffering from something similar? That is the incendiary argument of Campbell Harvey, professor of finance at Duke university. He reckons that at least half of the 400 supposedly market-beating strategies identified in top financial journals over the years are bogus. Worse, he worries that many fellow academics are in denial about this.”
