Coming from a year marked by the worst public health crisis of our generation, 2021 was such a wild and unpredictable year – an NFT sold for a record $69.3 million, Bitcoin doubled its value, millions of workers quit jobs that most folks would have been happy to have just a year earlier, the stock market was virtually as hot as the housing market, and the list goes on.
One month into the year, it’s now time to look forward to the economy of tomorrow.
Every year, I choose to have a little fun and create a list of four economic predictions. Looking back at my predictions for 2021, it turns out that I had a pretty good sense of how the recovery would unfold and what the critical economic and market implications would be.
In this article, I’ll discuss some of my best guesses for 2022 – the year in which we all hope to move on from the pandemic.
There will be significant changes: some good, some not so good.
Disclaimer: These are just my opinions and I don’t know what will actually happen. Economics is a rapidly changing and evolving entity that deals with the aggregated decisions of governments, businesses, households, and individuals. So please do NOT consider these predictions investment advice. But feel free to heckle me about them at the end of the year if they are wrong 😊
1: Fiscal Policy Is Going to Have A Big Impact on The Markets
In 2021 we witnessed a sudden and sharp surge in inflation resulting from bottlenecks in the global supply chain and the restoration of global economic activity.
Central banks will move toward a tight fiscal policy because of high inflation, economic recovery progress, and pandemic-related emergency support withdrawal.
Central banks will start reducing inflation by continuing monetary tightening at varying rates. Several economies have substantially raised rates or are close to doing so.
Interest rates on bank accounts and money markets will go up by a few points, but inflation will likely swallow that gain, meaning market conditions will worsen for riskier asset classes.
People will have less discretionary spending to put into assets.
2: Cryptocurrency Will Start Having More Utility
While Bitcoin’s price dipped below $34k in January, more and more companies will start adopting it as a form of currency.
Despite the recent price decline, Bitcoin is still more than twice as valuable as it was a few years ago. For cryptocurrencies, these kinds of surges and declines are nothing new or unexpected.
As the digital world grows, more people will want to use digital currency as well. Crypto tech is being adopted at a faster rate than humans first adopted the internet. The compounding acceleration of new adoption could push its value higher.
95 percent of coins out there will fail when markets fail. The ones left will be the whales that take over the space.
3: Stock Markets Will Either Have Single-Digit or Negative Growth
Stocks were inflated a ton during the last few years, and I have a feeling that the performance of markets will be less positive.
The combination of strong earnings from salary increases and rising interest rates will result in the S&P 500 making no progress in 2022.
The tech stocks that grew the fastest are the most vulnerable to fall the fastest as well.
4: Web 3.0 Will Become More Popular
Expect to hear a lot more about Web 3.0 as more and more people realize the advantages of being in decentralized networks.
Under Web 2.0, the internet has grown to become more social, leading to the creation of massive volumes of content and data. The problem is that these data and contents are principally controlled by a small group of tech giants including, Google, Microsoft, Apple and Amazon.
Web 3.0 will remove many issues around privacy that people are concerned about with these centralized networks.
The Semantic Web will utilize a machine-based understanding of data to create more intelligent, connected and open websites.
Apps and websites will process info in a smart human-like way. People will start seeing this third version of the internet based on blockchain technology as “the internet for the people.”
Even though my predictions are bold and should be taken with a grain of salt, I believe they’re all entirely plausible. Besides, it never hurts to be prepared and take advantage of the outcome.
Those businesses and individuals ahead of the curve will be better placed to take advantage of new opportunities that arise in 2022. As Mahatma Gandhi once said, “The future depends on what you do in the present.”