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2022 seems in a lot of ways to me like an archetypal second year of a president's term if you heard me a year ago i told you that first years of president's terms tend to be negative about half the time and when they're not negative they tend to be up pretty big that worked pretty well in 2021 when it was up pretty big which is what we told you it would be second years tend to be a little more often positive but only a little more positive about 57 of history and up a little bit less than first years and when not up negative that bifurcated negative or up a lot tends to make it so that if you're wrong with a forecast you're pretty darn wrong markets tend to do what few expect markets tend to do what in hindsight appears to be rational but pretty much no one expected right now a big year is something that no one expects there's quite a few forecasters that forecast up a little others are forecast down a little well you can't find hardly anybody who thinks the market's going to be up much the inherent nature of second years is when they're not negative they're quite a lot and that up up up tends to come in the back of the year not the beginning of the year the first half of a second year tends to make those who expect not much feel confirmed in their views feel they were right and they dig themselves in the history of the first half plus of second years of president's terms tend to be very what i call sloggy a lot of sidewaysness a lot of wiggle stock pickers market not a market with a lot of direction and that is driven by the acrimony as we start moving into the midterm elections in america confirmation bias is really really strong and confirmation bias is probably stronger about things in politics and almost anything i know confirmation bias being that tendency that we all have to see things that confirm that we were right in our prior views and to not see or to dismiss totally things that might indicate we were wrong in our prior views and so when it comes to politics whether on the left of the ideological spectrum or the right people tend to have the view that those those other guys they're they're the wrong ones they're the bad ones they don't know they're terrible they're dishonest they lie they they they they and the acrimony in a midterm year tends to build that tends to promote that sloggy first half of a year and then markets which pre-price all widely known information tend to pre-price the outcome of a second year which is relative or absolute gridlock this year it's going to be almost certainly absolute gridlock hardcore gridlock and markets love that because it brings in the third year political calmness and markets love political calmness i don't care if you're on the left or the right of the ideological spectrum whatever you would like to do in abundance if you could do it in abundance would scare the heck out of the market in the short term markets love political calmness and that's what midterms tend to render and will in particular this time when the margins in congress are thinner than they've been since the 19th century in both chambers that being the case it takes almost nothing to create that absolute gridlock compared to a normal midterm the forces are all in place for that now we're going to get political calmness the markets will pre-price that in the back half of the year and principally the fourth quarter the history of fourth quarters and second years of president's terms being positive is 83 percent way over normal uh positiveness of the stock market and that tends to roll into the perception of political calmness in the third year of the president's term i just want to say really simply we haven't had a third year of a president's term negative since 1939 because of that political comments and in that i want you to see that some of that feature gets front-end loaded into the fourth quarter of the second year so i expect a strong fourth quarter of second year that makes the whole year nicely positive the first half of the year maybe plus a little into the summer being pretty sloggy not down pretty sloggy not a lot of high expectation you should have as those who don't expect much feel more and more that they're right they get themselves stuck in that then the market takes off and runs away and leaves them behind that's the world i envision which then ripples over to pull foreign stocks with it because tends to be that in that second year with all of the acrimony people look to america increasingly as the year progresses to see what is it that america does or doesn't do that will impact them and that tends to build caution overseas as well so with that that's kind of my view about how 2022 should progress thank you so much
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