It’s time for my best guesses for next year: 2022 will be a year to get big and brave as a boom is ahead. Not a boom in everything, but certainly in many things. Some good, some not so good.
Let’s talk about the coming booms.
Kind reminder: don’t be a hero and consider these predictions as investment advice. You are not. They should be fun and thought-provoking. You can blaspheme me at the end of the year if you’re wrong.
That said, I basically bet 5 for 5 on my predictions this year. Given the Omicron, the Roaring 20s prediction might be shaky, but there is no evidence that the economy is slowing so I’ll take that as a profit. As of this writing, the Invesco DB Commodity Index Tracking ETF and medical device company DexCom, which I was referring to in my predictions, are up more than 40% since the start of the year. That’s more than the Invesco QQQ ETF, which rose 28%, and the S&P 500, which rose 27% in 2021.
Now until 2022 and the coming booms.
1. Price boom
Forecast: CPI exceeds 4% on average all year round
Inflation gets worse before it gets better. Wages are going up (that’s good!), But costs are likely to keep going up (that’s bad). Real estate prices and rents are still too high. Car prices remain in the stratosphere. Energy costs will rise this winter. Want to eat? Not only are food costs rising – or packaging getting smaller – but record fertilizer prices could drive food prices even higher next year. Also no, the situation in the shipping and ports is not much better, despite what you may hear. Rather, the ships only move further offshore. And sorry, Federal Reserve Chairman Jay Powell, if you don’t learn how to install or unload containers, a few rate hikes aren’t going to matter much in the near future. Assuming the government doesn’t change inflation metrics for us (hey, it’s an election year after all), we should end 2022 with an annual consumer price index increase of more than 4%.
2. Baby boom
Prediction: Record Births in the United States
I love that prediction. I would so much like it to be right. The pandemic and lockdown have taken their toll. About life, families and our collective psyche. But we’re getting out of there because people are going to do what they do: move forward. No matter what happens to Covid. Singles mix. Travel is booming. Love is in the air. Even hip millennials are buying big houses in the sleepy suburbs. Houses with additional bedrooms. Wink, wink. The “children” test all of them. Not for Covid, but for children. The pandemic has brought the family back into focus. It’s good. The birth rates in the US have always been falling. That should change next year. Is there a child-centered ETF? There should be. Make sure you buy baby supplies and anything birth-related, such as stocks of already-glowing Progyny.
3. Japan boom
Forecast: Nikkei 225 outperforms the S&P 500
Japan is an emerging country. Sounds strange, doesn’t it? Sure, Japan has a stagnant economy. Has been for years. Numerous recessions over the past few decades. And hey, Japan needs a baby boom so urgent that the government has put in place policies to incentivize people to start families. But from a business perspective, Japan is tackling it. Nikkei companies are valued well below the S&P 500, even if profits are rising. Oh, and Japan’s fiscal policy is as simple as ours. Jefferies’ analysts see value in many Japanese companies such as Sony, Toyota, Suzuki, Subaru, Denso, and others. Conclusion: The iShares MSCI Japan ETF EWJ will outperform the S&P 500 in 2022.
4. EV boom
Forecast: Sales of electric vehicles will exceed 10% of the car market
Hope finally meets hype. Electric vehicles (EVs) are still a tiny toddler in the American auto market. According to BloombergNEF, they account for around 4% of car sales. You are hampered by high prices and battery life worries. That will change in 2022. The number of available electric models will double to around 20. It’s still only a fraction of the total of around 300 models available, but makes sense for two reasons. First, you no longer have to be a Bitcoin billionaire to buy an electric vehicle. Next, we get what Americans really want: trucks and SUVs. Between the Ford F-150 Lightning and the Rivian R1T (Motor Trend Truck of the Year for 2022) and medium-sized so-called “cute utes” like the Volkswagen ID.4 there are the options that American families want (especially if we have the above get called baby boom). The price points are also falling.
Perhaps the biggest hurdle to selling outside of the cost – the availability of charging stations – is also being solved nationally. As I found out on a 517-mile road trip in an all-electric Polestar back in August, range anxiety is a real thing. But as more charging stations are built and drivers can see they don’t have to worry about where to charge when they are away, it will be a positive upward cycle that will drive sales.
5. Heavy metal boom
Prediction: copper and palladium look like gold
Would you like to build an electric vehicle? You need copper. Charging station? Copper. Huge battery to store renewable electricity? You guessed it, copper. The average electric car uses more than 150 pounds of copper. Now multiply that by millions of cars, batteries, power lines, and anything else we want to build on the grid. That’s a lot of metal to dig out of the ground. The world’s largest copper mining country – Chile – has just elected a new president who sounds like he doesn’t like copper mining. Freeport McMoRan must be in mining heaven. Meanwhile, palladium was a dog of a metal this year, but that could change. Palladium is mostly used in gas-guzzling cars, but it is now being tested in new battery technologies. All of this sounds like a recipe for increased demand without greatly increased supply. Bullish.
Special bonus forecast: The 10-year Treasury yield will end below 1.75% in 2022. Timestamp that!
Happy New Year and to a healthy, happy and pandemic end of 2022.