about 2 years ago • 3 mins
As the year draws to a close, the Finimize inbox is filling with research looking ahead to 2022 and the challenges and opportunities it may present for investors. Amid the deluge, the report I always look forward to reading most is Saxo Bank’s annual list of 10 “outrageous” market predictions – and this year’s was no exception.
Saxo’s predictions are provocative, but they’re still rooted in a conceivable future reality. So how did the Danish investment bank’s 2021 calls pan out?
Well, their prediction that a successful coronavirus vaccine would help return life to normal and cause a spike in inflation looks pretty prescient. But the market didn’t react as Saxo expected: rather than surging, bond yields have stayed low thanks to Fed support. And while few governments have embraced a full-on policy of Universal Basic Income, the support offered to those unable to work due to Covid has looked very similar in many parts of the world.
On the less accurate side, the pandemic hasn’t really undermined demand for city-center real estate, even as people flee large metropolises. Likewise, silver’s price has failed to benefit from accelerating inflation and demand from solar cell makers: the shiny metal is down 16% in 2021. And regulators in the US and Europe have still proved reluctant to take much action against big tech companies like Amazon, leaving the NYSE FANG+ Index up 14% this year.
Saxo is keen to stress that these predictions aren’t its “official” view on the market, but rather an attempt to provoke outside-the-box thinking. So with that caveat, let’s have a look at the most intriguing calls for 2022.
US consumer price inflation reaches 15% as companies are forced to hike wages to attract workers. The Federal Reserve (the Fed) repeats the mistake of the late ‘60s, when it “misjudged how hot they could run the US labour market without fanning inflation.”
How to trade it: Surging inflation prompts a bout of volatility in US stocks and corporate bonds. The SPDR Bloomberg High Yield Bond exchange traded fund (ticker: JNK) drops as much as 20%, and the ProShares VIX Mid-Term Futures ETF (ticker: VIXM) climbs by 70%.
Inspired by the threat of inflation, governments row back on their commitments to replace fossil fuels with greener forms of energy. “The plan is sold as the only pragmatic way to bridge the reality of our energy-consuming present with the desired low-carbon future, while also limiting the risk of social unrest caused by rising food and energy prices.”
How to trade it: Shares in traditional energy companies climb, with the iShares Stoxx EU 600 Oil & Gas ETF (ticker: EXH1) surging 50%.
Young people – we’re looking at you, Finimizers – continue to abandon Facebook, hurting parent company Meta. In response, Meta tries to buy Snapchat or TikTok and spends billions building its version of the metaverse, although “the plan struggles to take off as the young generation fails to sign up.”
How to trade it: Meta shares drop 30% compared to the broader market.
A group of women start copying the tactics of forums like Reddit’s WallStreetBets and organize to push for social change. Tired of some companies’ “sexist, racist, ageist and ableist practices”, they launch coordinated assaults on their share prices. Politicians worldwide welcome the movement, piling even more pressure on firms with “outdated patriarchal attitudes, poor gender equality in pay, and under-representation of women on boards and in management”.
How to trade it: Shares of targeted companies fall sharply.
Blockchain-based technology helps musicians to grab a larger share of streaming revenue. Artists are able to distribute their music directly to fans without centralized intermediaries like Spotify or Apple Music.
How to trade it: Spotify shares drop by a third.
Got your own outrageous predictions for 2022? Be sure to share it with your fellow Finimizers in our Premium group chats.
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