Post-pandemic. Post-Trump. Post-lockdown. Post-election. What will the world look like in the aftermath of the last few years?
Brand Story – People talk about the new normal, but what will that look like in 2022, and how will it impact investors? Each year, Arnerich Massena’s research team puts their collective heads together to envision what the future might hold, and which trends are likely to take shape. This year, we see reinvention as the overarching theme, leading to a vision of a “new normal” that could hardly be imagined just a few years ago.
Please note that these predictions are not investment recommendations, but an interesting journey into the potential landscape that could affect the future investment environment for everyone.
Reinventing money: The currency battlefield
We’ve come a long way from trading cowrie shells and salt (which is where the word “salary” is derived from – money used to buy salt). The functions of money are to serve as a medium of exchange and a store of value; money and currency have taken many forms throughout history, and it looks like we are on the cusp of witnessing another transformation.
Whether you think of them as currency, speculative investments, or a Ponzi scheme, it’s irrefutable that cryptocurrencies — and NFTs (non-fungible tokens) — are gaining in popularity and have been rapidly evolving to offer new features and ease of use. There is no doubt that globally, we are moving away from cash, and may even be shifting away from the U.S. “petrodollar” as the world’s primary reserve and trading currency. Central banks are exploring government-regulated digital currencies that will provide features of both the hard currency we know and the wild west of cryptos. In the meantime, governments have been busy updating regulations and tax rules to accommodate new digital currencies.
How all of this will play out is uncertain. Digital currencies open up new worlds in terms of how we use money; they facilitate easy trading but may be more volatile, they make possible negative interest rates that central banks can employ to stimulate the economy, and they may be programmed to track and manage individuals’ purchases to limit — for instance — carbon usage. Ultimately, we’ll likely see a shift in how we bank as well, moving to digital platforms rather than brick and mortar “banks,” as many financial services will be easily accessible without needing an intermediary.
In 2022 and beyond, we anticipate that currency will become a battleground, as the private, government, and central bank players vie for supremacy or at least wide usage and acceptance. The recent uptick in inflation could prove to be a boon for alternative currencies, as people search for alternative stores of value.
Reinventing investing: The rise of retail investing
It’s not just currency and banking that are getting an overhaul; the process of investing is evolving as well. Last year, we experienced a surge in speculative, “guerilla-style” investing with episodes like we saw with Gamestop, Dogecoin, and Hertz, in which social media drove short-term investment activity, in some cases in what appeared to be a coordinated fashion. With microinvesting platforms like Robinhood, we are likely to continue to see retail investing expand. Unfortunately, this may be a zero-sum game. While the media covers the successes of the rare retail investor who strikes it lucky, we don’t often hear about the millions on the other side of the ledger who suffer losses.
Investors are also gaining easier access to relatively complex investment instruments and strategies, and investors with little financial education and background are venturing into spaces like futures, derivatives, and short selling. We hope to see better education and communication to help investors understand exactly what they are investing in and the inherent risks. We anticipate short-term volatility will continue to make a periodic appearance in localized areas when famous figures with large followings (such as Elon Musk) generate social media-driven investment trends.
Reinventing energy: When aspirations meet actuality
The Biden Administration has promised to focus significant spending and efforts to move the United States toward using a greater proportion of renewable energy. Though we may have lofty aspirations when it comes to renewables, there are real challenges that need to be met along the way. A major shift in how we produce and use energy won’t happen overnight, and we are likely to see some complications as our ambitions meet with reality.
Underinvestment of traditional energy sources is likely to create higher energy prices in the short term, until we are able to build […]
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