There can be little doubt that the COVID pandemic that started in 2020 has left lasting changes on many aspects of the world. We started to see some of those changes pick up speed in 2021 and we are likely to see them continue into 2022. Let’s look at the changes we are seeing and where things may go.
Inflation
For a majority of the populous in the United States the last year or two is the first time they’ve seen real inflation. Inflation was something that happened to other countries, like Zimbabwe or Venezuela. Of course, those who lived through the 1970s will remember vividly the inflation that gripped the country during that period. There have been four major drivers of inflation over the last year; COVID-related supply chain disruptions, monetary and fiscal stimulus, wage pressures, and de-globalization. It is likely the supply chain disruptions will start to moderate as we move into 2022. We are also not likely to see the amount of fiscal or monetary stimulus we have seen previously. In fact, we will likely see the Federal Reserve start to reverse course on their accommodative policies in the year ahead. Wage pressures and de-globalization are likely here for a longer period, however. Barring some external shock, we are likely to see the rate of inflation slow next year, but still be elevated.
The Employment Picture
Throughout history the relative balance of power between employers and employees has oscillated back and forth. At its core though the relative power comes down to the number of available jobs compared to the number of available workers. If there are more workers than jobs, employers have more control. If there are more jobs than workers, then employees have more control. For just about the first time since the Baby Boom generation came into work force, there are many more jobs than workers. There are currently over 11 million job openings as measured by the Department of Labor, the highest seen since they started tracking the statistic. As mentioned in pervious issues, those 55 years of age and older (the Baby Boomers) are not coming back to work after COVID. Younger workers are not just demanding higher wages, but also different work environments (working from home) and other workplace cultural changes (less formality). Those businesses who react to these changes will likely benefit from having an intact workforce. Those who do not will struggle to maintain staffing.
The Metaverse
In 1992, Neil Stephenson, author of the sci-fi novel Snow Crash, coined the term Metaverse to describe an internet-like 3d world that existed alongside the physical world. Metaverse is now the catchall term for the next iteration of the internet (also known as Web3) and you’ll be hearing about it a lot more in the coming year. When I was in college the first web browser came out (Netscape), during that time the internet was all about sharing information. Basically, anything you wanted to know you could now look up. Information was no longer scarce; a huge change. However, it was still fairly hard to put things on the internet. One had to learn HTML (a markup language to display websites) and to make changes it took time. That all changed with social media; for both good and bad. With the advent of social media, it became all too easy to put things onto the internet. With that came interactions back and forth between people. It became easy to find like-minded people or people with similar interests. Unfortunately, it also became possible to just connect with people who agreed with your views instead of embracing a variety of viewpoints, but that’s an issue for a different day. The Metaverse (or Web3) allows for the exchange of value across the internet through a technology known as blockchain.
Most of us have used credit cards to buy things on the internet. What makes blockchain unique is unlike credit cards, an exchange of value using blockchain does not require an intervening bank. The other thing that blockchain allows is the idea of ‘digital property rights.’ Which is a topic again, for another day. If all of this seems farfetched and a bit crazy to you, you are in good company. There are plenty of people who think this whole Metaverse idea is pure fantasy and think that the government will step in and regulate away things like blockchain assets (e.g., cryptocurrencies) out of existence. For those who believe this will happen, I’ll leave you with a quick story. When automobiles were first being introduced there were many people who did not like the implications of ‘horseless carriages’ relative to their business models. So, they pressured the British government to pass the ‘Red Flag Act’ in 1865 which required a person waving a red flag to precede all automobiles by 60 yards to ‘warn’ people and livestock.
We look forward to working with you to achieve your goals in the year ahead. Please don’t hesitate to reach out with questions or concerns.
The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Kevin Sullivan and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. This material is being provided for informational purposes only. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Cryptocurrencies are not registered with the SEC, and the cryptocurrency marketplace is currently unregulated. Cryptocurrencies are a very speculative investment and involves a high degree of risk.