As we near the end of another year and anticipate what the new year will bring, it is time for my annual Outlook. I titled my 2021 Outlook, “Less Stress, More Fun in 2021.” My 2022 Outlook theme is “Welcome the New in 2022”.
If you would like a copy of my 2021, just let me know. For this year’s final Investor’s Edge column, I am happy to share my insights and forecasts for the global stock market and world economy in the new year ahead. This column will be a summary of the 2022 Outlook provided to my clients, due to space constraints here. Here’s the highlights of what to expect in 2022.
What will be new in 2022? New stock. New trends. New Fed policy. New Jobs. New consumer behavior. New health.
2021 was a record year for new stock offerings. New public stock issues between IPO’s and SPAC’s (Special Purpose Acquisition Company) shattered the previous new public stock listings set in 1999. Expect that to continue in 2022. More new stock will go public. A couple of highly anticipated names are Impossible Foods and Instacart.
Persistent inflation pressures will spark new trends in market sectors such as gold, oil, housing, and other real assets. The Consumer Price Index jumped to a 12-month rate of 6.2% through October 2021. Overall, the cost of living is rising at the fastest pace in almost 40 years. Oil soared by roughly 80% in 2021 through early November and gold, at around $1,800 per troy ounce, is still below its August 2020 high over $2,000. Expect both to hit new highs in 2022. At least through the first half of 2022, expect the housing market to climb to new highs. The continued combination of lower rates, easier lending standards, low supply and high demand will remain strong tailwinds.
The Federal Reserve Board and its decision-making committee, the Federal Open Market Committee (FOMC), has been at the forefront of investors’ attention seemingly everyday for the last decade and beyond. Even the Board’s chairman has been a topic of market speculation in 2021. We now know President Biden will let Chair Jerome Powell keep his job going into 2022. Expect the FOMC to announce new interest rate policy next year. My forecast for interest rates is they go higher sooner.
Want a job? They’re plentiful. An October jobs market report noted there over 10 million job openings. Many will likely be filled in 2022, driving down the current unemployment rate. Employers, though, will probably have to offer more pay to fill them. I expect the fastest wage rate increase in a long time in 2022. This in turn will fuel higher inflation.
More workers making more money should result in more spending. That should be the story for consumers next year. What could be new next year is where and how consumers spend. While wages will rise, the prices of goods and services could rise more. American consumers will likely shop more at discount stores in the year ahead. Assign this shift in consumer behavior to inflation. Transactions at Dollar Tree climbed 65% in 2021 compared to pre-pandemic 2019. I expect that consumer choice to stick in 2022.
The best for last. New (good) Health. As of this writing, the country of Austria is in lockdown. The World Health Organization is concerned and warns new Covid cases are rising sharply on the continent. Germany is considering similar measures. With about 65% of Austria’s population vaccinated, it is one of the lowest in Western Europe. While this is NOT good, new GOOD health should be the best new year’s gift in 2022. We have a booster. We have antiviral drugs, and many millions of Covid vaccine doses. 2022 is hopefully the beginning of the end for the pandemic. Beyond pharmaceutical help, some expect a new Covid variant is unlikely next year. Hopefully, there will be no new wave of Covid-19 in 2022.
ENJOY THE NEW IN 2022. HAPPY NEW YEAR!
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