Rates, growth… “a sharp depression in the stock market is inevitable, beware of a return to earth this year!”


First of all, allow me to wish you a happy new year 2022, full of happiness, health and success. A year 2022 which, we hope, will mark the return to a normal world. Indeed, after almost two years of the pandemic, around 5.5 million official deaths (i.e. assuming that Covid19 only killed 4,636 people in China, an official figure that has no elsewhere not changed for a year …), several confinements around the world, numerous attacks on our individual freedoms, an incalculable number of depressions and suicides, … normal life should finally resume in 2022.

In a few months, at least if all goes well, we will be done with confinements, curfews, mandatory masks, PCR and antigen tests at all costs, sanitary passes, gauges … Long live the return. travel in the open air and without constraint, air travel, cinema screenings, plays, shows, without compulsory mask, but also teamwork and face-to-face, conferences without limitation of the number of participants, carefree meals in restaurants, wedding banquets, a brief of life …

>> To read also – “The Fed and the ECB have become dangerous pyromaniac firefighters, the stock market risks a crash!”

Obviously, even though we’re not quite there yet, it feels good to know we’re getting close. However, let us not forget that this return to normality will also result in the end of the exceptional measures which were supposed to make us better accept the pandemic and the confinements, and in particular the waltz of billions of States, itself financed by Insane “banknotes” from central banks.

In other words, the end of the pandemic, which we wholeheartedly hope for in 2022, will also sign the end, albeit gradual, of all public aid and abundant liquidity from central banks around the world, and in particular on both sides. of the Atlantic. The problem is that the pandemic has left indelible marks. And especially on the public debt front. Thus, between 2019 and 2021, the weight of the latter in the GDP of almost all the countries of the world has quite simply exploded: from 108% to 133% in the United States, from 83% to 102% in the Euro Zone. , from 98% to 118% in France, from 135% to 160% in Italy or from 180% to 210% in Greece.

In normal times, this surge in public debts should have resulted in a very sharp increase in interest rates on government bonds. But, insofar as public debts have been bought for the most part by central banks, not only has this not been the case, but in addition, these interest rates have fallen, before nevertheless rising for a few weeks. , which also foreshadows the rest of the events for the year 2022.

Because, now that the pandemic is losing ground, that the recession is over and that inflation has risen dangerously, in particular because of government and monetary mismanagement, it is clear that central banks will have to stop their “money boards” . Therefore, with public debts exceeding 100% of GDP, bond interest rates are likely to rise more and more sharply, which will result in strained credit conditions and inevitably slow down economic activity.

>> To read also – Inflation, growth … the stock market risks a historic crash in the event of stagflation, warns UBS!

Because let’s not dream: economic growth of 5.9% for the world in 2021 or 6.9% for France is not normal. They simply correct the historic recession of 2020 and are also the product of the explosion of public debts and “money boards” which will now cease.

At the same time, if central banks are no longer there to absorb fiscal deficits, some states risk being forced to raise taxes, which will negatively affect activity. In other words, as the world emerges from its most serious crisis since World War II, the mistakes of the past will prevent many countries from experiencing sustained strong growth.

After reaching – 3.1% in 2020, then + 5.9% in 2021, the average annual variation in world GDP (obviously real, i.e. excluding inflation) should be around + 3.4% in 2022, ie 0.1 point lower than its average level from 1980 to 2019. In other words, it will experience a return to its normal level, after two extreme years.

Marc Touati

This slowdown will be observed everywhere, including in the locomotive of the world economy for 20 years, in this case China. After reaching 2% in 2020, then 8.3% in 2021, the annual growth of Chinese GDP should lose 3 points in 2022, to 5.3%.

We also anticipate a logical decline in growth to 2.9% in the United States, 2.3% both in France and for the entire Euro Zone and only 1.2% for Japan.

ACDEFI

In addition, the end of free liquidity, the rise in bond interest rates and the slowdown in growth are sure to weigh on the stock markets, which, too, will become less extravagant, returning to levels in line with the economic reality.

>> To read also – Stock market: has a historic bubble burst? Crash in sight?

And this, especially since they will no longer be able to benefit from the bubble of GAFAM and digital technology in the broad sense. Indeed, carried to the pinnacle by the largesse of central banks and by the pandemic which has notably developed teleworking and favored virtual and non-face-to-face exchanges, digital companies will suffer a massive “boomerang effect” at the end of the Covid19. , all the more so if the States decide to increase the taxation which weighs on this type of company. As promised by Joe Biden.

However, to the extent that the digital bubble has been the spearhead of the stock market bubble in recent years, its bursting will inevitably produce a severe stock market depression, which will spread to all sectors of activity. And for good reason: insofar as the equity markets suffered only slightly from the 2020 recession and soared more than rightly in 2021, the time has now come to the end of exuberance.

Finally, even defeated, the pandemic will continue to weigh negatively on the level of globalization and therefore on global growth. It remains to be seen whether we will be able to draw the consequences to weaken China, where the Coronavirus started and which remains, despite everything, the country that suffered the least, not to say the most benefited.

In other words, yes, strongly the end of the pandemic, but, no, do not believe that 2022 will be economically better than 2021. It will nevertheless mark the return to a certain normality, which will be highly beneficial after the excesses of the last two years. Let us therefore remain vigilant and never forget that crises are always phases of opportunity, but only for those who know how to face them with realism and responsibility.

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Marc Touati, economist, president of the ACDEFI cabinet

His new book RESET – What new world for tomorrow? # 1 in Economic Essays since its release on September 2, 2020

Marc Touati

Find all his videos on his Youtube channel. Including the latest, “Perspective 2022: return to a normal world?”





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