The Local Focus

Governments and businesses are increasingly prioritizing the availability of goods and services while ensuring jobs are filled. Recent years marked by trade conflicts, COVID-19 lockdowns, and supply chain challenges have shifted the focus from globalization back to localization. This trend is expected to persist, even as individuals look forward to international travel or returning to overseas positions.

The emphasis on local dynamics suggests that while global companies re-emerge, local investments will remain vital. Significant funding will be directed toward domestic infrastructure and supply chains, driving growth. Consumers are likely to seek locally produced goods to avoid previous shortages, with domestic tourism remaining robust due to lingering fears of lockdowns. Just as the Great Depression left lasting impacts, the scars from the COVID-19 era are anticipated to endure.

As we consider elevated household savings, uncertain goods supply, and rising wages, it's evident that 2022 may experience a feedback loop of inflation. This loop could continue until a new equilibrium between local production and globalization is established.

If central banks follow Stanley Druckenmiller's advice and take the opportunity to raise and normalize rates, we might witness a series of interest rate hikes throughout the year. Historically, rising rates correlate with declines in tech stocks, while banking and financial sectors benefit.

Local Focus Predictions:

• Companies are set to invest significantly in inventory management, local production, and comprehensive logistics.
• Expect an expansion of delivery fleets as businesses ensure timely product access for customers.
• The Buy Now, Pay Later (BNPL) sector may face challenges, struggling to transfer interest costs in a rising rate environment amid increasing regulatory scrutiny and competition from traditional banks.
• Higher interest rates could lead to falling housing prices unless governments address skill and job shortages with robust immigration policies, potentially resulting in civil unrest if wages fail to keep pace with inflation.
• The US Federal Reserve is likely to implement rate hikes more rapidly than other central banks, strengthening the US dollar by year-end.

This video, "Top 10 Marketing Strategies for 2022," explores essential marketing tactics that businesses should implement to thrive amid these changes.

Technology: The Continuous Evolution

The pace of technological advancement is unlikely to slow in 2022, particularly concerning shopping habits. Supermarkets are expected to invest heavily in online grocery services, with 'Live Retail' emerging as a dominant trend. The extended time spent at home has led many to embrace online shopping, including those previously hesitant.

The intriguing aspect of technology this year lies in the balance between physical and digital experiences. Our online interactions may reflect our emotional conflicts between socializing and the desire for safety at home. Companies like Virtual Dining Concepts, which merge the digital and physical realms, may find themselves in a favorable position.

According to McKinsey, key technology trends include 'Live Retail' and RFID advancements. Live Retail allows consumers to shop while enjoying TV shows or online content, with stores retaining customers' preferences for seamless transactions. RFID technology is evolving from simple security tags to smart shopping tools that facilitate a streamlined shopping experience.

Technology Predictions:

• Instagram is poised to transition into a more commercial platform, shifting user perception from a social media site to an online shopping catalog.
• Niche retailers are likely to thrive, leveraging their understanding of target markets to capture sales through expertise and multi-channel strategies.
• Development costs will continue to escalate, attracting private equity investment while allowing culture-focused startups to disrupt established players.

This video, "MY MARKETING STRATEGY FOR 2022," discusses personal approaches to doubling revenue, emphasizing strategies that align with changing consumer behaviors.

Human Behavior: The Unpredictable Element

While the macroeconomic landscape consists of numerous variables, human behavior remains a particularly challenging aspect to forecast. The response to rising interest rates could yield various outcomes, as markets often behave irrationally until they stabilize. The extreme price movements seen in 2021 may persist as investors react to market conditions.

The course of 2022 will be influenced by our collective response to COVID-19 and any potential lockdowns. A sense of fatigue and frustration appears to be settling in globally. The Omicron variant may represent the last significant challenge the world is willing to confront, after which a return to normality is anticipated. However, this "normal" will be shaped by the lessons learned during the pandemic.

In seeking to compensate for lost time, 2022 is expected to see a surge in activity and spending of accumulated savings. While expenditures may not revert to durable goods, they are likely to align with the experience-oriented preferences of Gen Z and Millennials. Families and friends will prioritize shared moments and experiences that have been missed, leading to a boom in the service sector.

Human Behavior Predictions:

• ESG (Environmental, Social, and Governance) investing will remain a prominent theme, with capital flowing into ESG-focused ETFs. The real shift will occur as 80% of companies adopt ESG principles, prompting investors to steer clear of the remaining 20% that do not.
• The emphasis will be on creating experiences, with family-oriented events and celebrations taking precedence in 2022.
• The overarching sentiment will be driven by a collective desire to move beyond COVID-19 and foster togetherness.

The Year Ahead

For investors, strategists, and operations managers, 2022 promises volatility and transformation. While the year may conclude flat or slightly down compared to 2021, the world will undoubtedly undergo significant changes.

By year's end, interest rates are expected to rise, the US dollar may strengthen, and banks will likely benefit from increased interest margins. The BNPL sector may not regain its previous heights, while value stocks are poised for a resurgence. Although households and businesses may feel pressure from rising rates, the most pronounced effects may not be felt until 2023-2024.

Markets are inherently forward-looking, and undervalued companies with strong balance sheets could become attractive in a normalizing economy. Technology investments may appear riskier as hurdle rates evolve, but opportunities will persist for those willing to navigate the shifting landscape.

Feel free to comment with any questions or suggestions for future analyses. Please note that this article reflects the author's personal opinions and does not constitute financial advice.