10 courageous predictions for 2022
31 Dec 2021
5 min read
The second year of the pandemic brought glimmers of hope that humanity can crush the new coronavirus. While the sanitary situation was highly volatile, the stock market was less eruptive and followed a steady trend. Commodities markets were more exciting and Bitcoin consolidated its position. But, what will the New Year bring to investors?
The ten learnings from 2021 include:
- There is a new “normal”. One year ago we all expected to be able to go back to a pre-COVID normal. It is clear that this normal will never come back. Instead we have a new normal with various mutants, COVID waves, repeated booster vaccines, sporadic lockdowns and more uncertainty.
- Big pharma is overvalued. The big winners of the pandemic were without any doubt the pharmaceutical companies. In 2020, governments paid billions to vaccine producers hoping to curb the spread of the pandemic. One year later, after many hundreds of billions spent and a sustained vaccination campaign, the new coronavirus seems stronger than ever.
- Inflation is real. In 2020 analysts were divided between those predicting inflation and those seeing deflation. The inflationary scenario became reality in 2021, with monthly CPI figures reaching 5 to 8% in developed economies.
- Supply shortages are a key risk. While inflation is the logical result of the massive monetary injections deployed by central banks, the price explosion is mainly caused by raw materials and workforce shortages. The global economy entered a regime of structural shortage.
- Tapering has become a popular concept. The Fed realised that inflation will eventually erode the value of the US dollar and ultimately the US’ position in the global arena. Tapering the assets repurchase is the ultimate solution to cool down the inflationary trend.
- Bitcoin is not a joke anymore. Bitcoin started 2021 with many warnings pointing that the leading crypto will plunge to zero and anll crypto-aficionados will lose everything. Bitcoin had a stable evolution compared to previous years with fluctuations above a relatively high support level.
- ESG investing is mainstream. A few years ago ESG was a nice thing to have in an investment portfolio. In 2021 ESG investing became a core strategy for most institutional investors.
- Tech companies drove economic growth. The pandemic reshaped the real economy. Industrial companies and banks are a thing of the past. Big Techh sits at the top of the trophic chain and dictates the rhythm and the direction of economic development.
- Energy prices rallied. While the 26th UN Climate Change Conference gathered world’s leaders with the ultimate goal to establish a roadmap towards the fossil exit, developed countries faced an unprecedented energy crisis with abrupt spikes in gas and electricity prices.
- Investors look into the Metaverse and NFTs. Digitalisation went beyond reality. The next big thing seems to be virtual reality. This new universe will have its own markets and its own virtual assets.
2022 will forsure be more hectic than 2021.
The top ten outrageous prediction for the next year are:
- Hyperinflation will trigger deflation. The current inflationary trend will accentuate in the next quarter. The price increase will ineluctably lead to a reduction in the consumption of non-critical goods and services. Therefore, a deflationary spillover effect will be observed in certain markets.
- Interest rates will increase (significantly). The Fed and the European Central Bank will start increasing their interest rates. The increase should be consistent in order to efficiently balance the massive amount of public debt.
- The US dollar will reach parity with the Euro. The US dollar will strengthen its position as leading global currency and investors will have more appetite to own dollars. Therefore, the dollar will go towards parity with the Euro.
- The energy crisis will continue. More turbulence will develop into the energy markets. Prices will continue to soar especially during the first and last quarters of the next year. Oil prices will soar as demand for fossil fuels will increase after the Omicron variant fades away.
- Tesla’s share will plunge. The time of reckoning for Tesla and its flamboyant founder, Elon Musk will come. The overpriced Tesla share will deflate, when investors will realize there is not enough demand for EV to sustain such high prices. Moreover, traditional carmakers are rapidly moving into the EV market.
- Gold ounce prices will soar above 2,200. Gold will see traction, when the stock market will enter into the logwaited bearish path. Investors will need a safe harbour and gold will be amongst the main safe harbour investment strategies.
- Default rates will spike. When interest rates increase, the entire bond market will crumble. Many companies will be incapable of refinancing or finding liquidity. and will ultimately file for bankruptcy.
- Financial stocks will become worthless. Traditional banks will go through a turmoil as their balance sheets will require massive impairments resulting from the defaults, increased volatility and higher interest rates.
- The tech bubble will burst. Investors will realise that there are too many apps, platforms and digital products. With the big firms cannibalising the market, there is not much palace for too many competitors. Tech stocks will plunge and the sector will go through a structural consolidation.
- Bitcoin will climb above 100,000 USD. Bitcoin paid its dues and going above 100,000 USD should be a natural evolution. In the long term, Bitcoin as well as the other coins will see volatility. Doge and other meme coins should prepare to go bust.
The wolf will live with the lamb, the leopard will lie down with the goat, the calf and the lion and the yearling together; and a little child will lead them. Isaiah 11:6
The information and data published in this research were prepared by the market research department of Darqube Ltd. Publications and reports of our research department are provided for information purposes only. Market data and figures are indicative and Darqube Ltd does not trade any financial instrument or offer investment recommendations and decision of any type. The information and analysis contained in this report has been prepared from sources that our research department believes to be objective, transparent and robust.