Here we are, almost into 2022. Econopolis is looking to the future with certain trust despite the difficulties and threats for the planet. More than ever, we are convinced there are opportunities to increase our efforts for a more sustainable finance.
Understanding the challenges is crucial to make decisions. As investors, which economic trends do we have to be prepared for during the months ahead?
1) After “the Great Resignation”, “the Great Return”.
The end of the Covid-19 support measures and the rising cost of living are causing freelancers to return to the security of a permanent job. They are being met by employers who, more than before, are showing flexibility and attention to the quality of life of their staff.
2) Every Company is Tech
Where the pandemic was the catalyst of choice in all industries to embrace technology, as of 2022 we are seeing which companies have done so in a good way. Those companies that used technology to boost productivity and better meet the needs of their customers will be increasingly ahead of their competitors.
3) China is no longer the locomotive of the global economy
Contrary to what Western central banks and administrators did at the outbreak of the financial crisis in 2009, the Chinese Communist Party, in the aftermath of the Evergrande bankruptcy, is embarking on a prolonged, and sometimes painful, restructuring of debt in the real estate sector. The Chinese party also wants more oversight of the (Tech) Giants, and stresses the importance of redistribution. All of this is putting a damper on the rampant growth and innovation that China’s tech sector has enjoyed in recent years.
4) Owning a home is going to weigh heavier
Interest rates are rising, there is an avalanche of renovation costs due to the transition to energy neutrality, impending changes in the tax treatment of rental income and an oversupply of rental properties on the market after the over investment in recent years. These are all headaches for investors in residential real estate.
5) After Covid lockdowns and stimulus, energy lockdowns and stimulus
Imports and current gas reserves are at historic lows. On the one hand, there are the rising tensions on the border between Russia and Ukraine, and on the other hand, some Belgian nuclear power plants are being shut down early. Together with a cold winter, such a combination could well cause sky-high energy prices (15 times the average price in the US) to turn into energy shortages. The term “lockdown” thus finds a second meaning. And fiscal taps will open again.
6) Politics overshadow sports
The Winter Olympics in Beijing sees not only no foreign spectators or journalists, but also few foreign guests. In an almost North Korean choreographed spectacle, some courageous athletes manage to denounce the fate of the Uyghurs. The tone is set for the World Cup in Qatar, where criticism of the wretched working conditions of foreign workers overshadows the sporting event.
7) Facebook loses face
Facebook’s loss in market share among millennials and Gen-Z (only 27% of whom still have a Facebook account) continues in 2022, in favor of TikTok and other “hipper” platforms. With the loosening of covid restrictions, this same target audience is throwing themselves fully into “real life” rather than Mark Zuckerberg’s “Metaverse.” Tesla also thunders lower in 2022, as has been predicted for some time, and even Amazon. Only Google escapes the dance.
8) Crypto investors discover gold
The popularity of Bitcoin and other crypto currencies has given birth to a new generation of “hard money” adherents (according to the Austrian school). Instead of converting their profits from the past few years into the reviled “fiat” money, the Bitcoin “whales” are diversifying their crypto fortunes into gold as of 2022.
9) Blue Chip art sets new records, the NFT market crashes
The persistence of negative interest rates, fears of inflation and the recovery of the economy lead wealthy investors even more towards scarce assets such as works of art by internationally renowned artists. Art is portable, cheap to maintain (certainly in comparison with e.g. real estate) and the ultimate status symbol in a society that increasingly relies on outward show. In contrast to the scarcity of masterpieces (“blue chip art”), there is an oversupply of “digital collectibles”. 2022 will create an indigestion in the NFT market.
10) Gigantism is bad capitalism, but remains a strong investment
It is bad capitalism, but as long as our governments do nothing the tech giants will continue to grow and prosper. Alphabet has more technology in the slide than all Belgian companies combined. The tech giants are now bigger than the entire European stock market put together and they remain a good investment for investors with a long-term horizon.
Macro-economist and founder of Econopolis