It is normal around this time that people consider the upcoming year and even make predictions about what may happen. This year, I’m not going to do that. Instead, I will make predictions about what won’t happen in 2022.
We won’t enjoy 15% or more stock market returns. Despite chat in some quarters about pent up consumer demand from excessive constraints related to COVID19 being ready to unleash a bumper year, don’t get too excited. Firstly, it is arguable that such pent up demand actually exists. Many people have been damaged so severely by constraints on their ability to earn income, they may take years to recover. The wealthy may have been frustrated by not being able to travel, but they amused themselves in other ways by changing consumption patterns, not stopping consumption. In any event, consumer demand does not create economic growth. Yes, it is a component of GDP but that only shows the inadequacies of using GDP as a measure of growth. Only production through ever improving efficiencies creates growth. Before the industrial age, people weren’t poor because they did not demand products and services. They were poor because the production capability of the economy was poor. How will productivity fare in 2022? Given various on-going supply side constraints, not to mention wariness to commit new investment in these times, I think growth will be weak in 2022. Some stocks will do well, of course, but the broader market will be weak. Not one to give financial advice unless you pay me, my portfolio recommendations are available privately.
We won’t see interest rates reduce. Interest rates are going up. They would have gone up in 2009 had central banks around the world not undertaken a massive policy action to artificially suppress them. The natural rate of interest is not zero, can never be so or even close to zero. (This is because of an inherent human characteristic that if you want something, you would prefer to have it sooner rather than later – if there is interest in this topic, pun intended, I can do a separate post.) That interest rates have been kept so close to zero for so long indicates an eventual spring back will occur as the ability of central banks to manipulate the market wears out.
We won’t see the demise of coal. In the production of energy coal, gas and nuclear are the grown-ups in the room. Vain billionaires, green dreamers and rogue rent-seeking snake oil salesmen would try to have you believe wind, solar and and hydro power are cheaper, just as effective as fossil fuels and will save the planet. They are wrong. Pure and simple. Ask Xinping or Putin if you don’t believe me. That said, until the population realises the green con, political leaders in the woke West, including Australia, will continue the green madness. Don’t expect energy prices to fall.
The Winter Olympics in China next month will not be a COVID19 super-spreading disaster for China. I expect some pushing the idea that the games will unleash COVID19 and spread destruction across the world as the participants return to their home countries just want to have a go at China. No, the reason the games won’t be the world’s most massive super-spreader event is because COVID19 has already spread throughout the world. There are few places where it hasn’t emerged. It even emerged in Antarctica.
We won’t see the end of wokism. It’s going to get worse before it gets better. The good news is that the worse it gets, the more normal people realise how bad it is and the more they start fighting back. I’d say it has a couple more years to run. As Andrew Breitbart said, politics is downstream from culture. As soon as the political elite sniff the wind and sense that popular culture has turned against this madness, they will drop it like a hot potato. Just look at how the narrative regarding COVID19 is rapidly changing as a good example. We now see the Australian PM and US health bureaucrat Fauci saying things such as hospitalisation data has overstated COVID19 numbers due to not recognising the difference between being hospitalised for COVID vs with COVID. Many normal people have been pointing that out for over 18 months only to be shut down, cancelled, ridiculed etc. Put enough pressure on and eventually the political class will fold.