It's time for my best guesses for next year: 2022 is a year to go big and bold, because a boom is coming. Not a boom in everything, but certainly a lot of things. Some good, some not so good.
Let's talk about the booms to come.
Friendly reminder: Don't be a hero and consider these predictions investment advice. They are not. They are meant for fun and to make you think. You can razz me about them if they are wrong at the end of the year.
That said, I basically went 5 for 5 on my predictions this year. One could dither over the "Roaring 20s" prediction, given omicron, but there's no indication the economy is slowing down so I'll take that as a win. As of this writing, the Invesco DB Commodity Index Tracking ETF and medical device company DexCom which I referenced in my predictions, are both up more than 40% year-to-date. That's more than the Invesco QQQ ETF, which gained 28%, and the S&P 500, up 27% in 2021.
Now, on to 2022 and the booms to come.
Prediction: CPI tops 4% on average all year
Inflation will get worse before it gets better. Wages are on the rise (that's good!) but costs are likely to rise even more (that's bad). Home prices and rents are still too darn high. Car prices remain in the stratosphere. Energy costs will rise this winter. Want to eat? Not only are food costs up — or packages getting smaller — but record fertilizer prices now could send food prices even higher next year. Also, no, the shipping and ports situation isn't much better, despite what you may hear. Rather, the ships are just moving further offshore. And sorry Federal Reserve Chair Jay Powell, unless you learn how to farm or unload containers, a few interest rate hikes won't matter much in the near term. Assuming the government doesn't change the inflation metrics on us (hey, it's an election year after all), we should end 2022 with an annual consumer price index gain of more than 4%.
Prediction: Record births in the U.S.
I love this prediction. I so want it to be correct. The pandemic and lockdowns have taken a toll. On lives, families, and our collective psyches. But we're coming out of it, because people are going to do what people do: move forward. No matter what happens with Covid. Singles are mingling. Travel is booming. Love is in the air. Even hip millennials are buying big homes in the sleepy suburbs. Homes with extra bedrooms. Wink, wink. The "kids" are all testing. Not for Covid, but for children. The pandemic has brought family back in focus. That's a good thing. Birth rates in the U.S. have been declining forever. That should change next year. Is there a kid-centric ETF? There should be. Think about going long baby stuff and anything birth-related, like shares of already red-hot Progyny.
Prediction: Nikkei 225 tops the S&P 500
Japan is a country on the rise. Sound odd, right? Sure, Japan's got a stagnant economy. Has for years. Numerous recessions in the past few decades. And hey, Japan needs a baby boom so bad that the government has come up with policies to incentivize family creation. But from a company perspective, Japan has got it going on. Valuations of Nikkei companies are well below that of the S&P 500, even as earnings are growing. Oh, and Japan's fiscal policy is as easy as ours. The analysts at Jefferies see value in many Japanese companies like Sony, Toyota, Suzuki, Subaru, Denso and others. Bottom line: the iShares MSCI Japan ETF EWJ outperforms the S&P 500 in 2022.
Prediction: Electric vehicle sales top 10% of the car market
Hope finally meets hype. Electric vehicles (EVs) are still a tiny tot in the American car market. They account for about 4% of passenger car sales, according to BloombergNEF. They're hampered by high prices and worries about battery life. That changes in 2022. The number of electric models available will double to about 20. It's still just a fraction of the 300 or so total models available, but meaningful for two reasons. First, you no longer need to be a bitcoin billionaire to afford an EV. Next, we're getting 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), along with midsized so-called "cute utes" like the Volkswagen ID.4, there are the options American families want (especially if we get the aforementioned baby boom). Price points are also coming down.
Maybe the biggest hurdle to sales 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 in August, range anxiety is a real thing. But as more charging stations get built and drivers can see they won't have to worry about where to charge when not home, it will be a positive upward cycle that sends sales higher.
Prediction: Copper and palladium look like gold
Want to build an EV? You need copper. Charging station? Copper. Giant battery to store renewable power? 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 everything else we want to build on the grid. That's a lot of metal that needs to be dug out of the ground. The worlds largest copper mining country — Chile — just elected a new president who sounds like he doesn't like mining copper. Freeport McMoRan must be in mining heaven. Meantime, palladium has been a dog of a metal this year, but that may change. Palladium is mostly thought of as being used in gas-guzzling cars, but it's now being tested in new battery technologies. All sounds like a recipe for increased demand on not much increased supply. Bullish.
Special bonus prediction: The 10-year Treasury yield ends 2022 under 1.75%. Time stamp that!
Happy new year and here's to a healthy, happy and pandemic-ending 2022.