2021 Predictions: What Experts See in the Year Ahead
Making predictions is a tricky business at the best of times, but especially so after a year of upheaval. Even so, that didn’t stop people from trying their hand at reading the crystal ball. If anything, the uncertainty creates a stronger temptation for us to try to forecast the year ahead.
Out of the thousands of public 2021 predictions and forecasts available, there are plenty of one-off guesses. However, things really get interesting when a desperate majority of experts begin to agree on what might happen. In some ways, these predictions from influential experts and firms have a way of becoming self-fulfilling prophesies, so it’s worth paying attention even if we’re skeptical about the assertions being made.
This year, we more than doubled the number of sources analyzed for our 2021 Predictions Consensus graphic, including outlooks from financial institutions, thought leaders, media outlets, consultancies, and more. Let’s take a closer look at seven of the most popular predictions:
ESG reaches a tipping point
It seems like only recently that the term ESG gained mainstream traction in the investment community, but in a short amount of time, the trend has blossomed into a full-blown societal shift. In 2020, investors piled a record $27.7 billion of inflows into ETFs traded in U.S. markets, and that momentum only appears to be growing.
Fidelity, among others, noted that climate funds are delivering superior returns, which makes ESG an even easier sell to investors. Nasdaq has tapped ESG to be “one of the hottest trends” over the coming year.
China has a strong 2021
Financial institutions that issue predictions generally hedge their language quite a bit, but on this topic they were direct. The world’s most populous country has already left the pandemic behind and is back to business as usual. Of the institutions that mentioned a specific number, the median estimate for GDP growth in China was 8.4%.
A souring outlook on SPACs
Much like any hot trend, once enough people get on the bandwagon the mood begins to sour. Many experts believe that special purpose acquisition companies (SPACs) are going to enter that phase in 2021.
SPACs had a monster year in 2020, raising $82 billion in capital. That’s more funds in one year than in the last 10 years combined. Of course, now that these 200+ companies are flush with capital, they’ll need to find a target. Scott Galloway argues that SPACs “are going to vastly underperform over the next two to three years” since there aren’t enough good opportunities to satisfy that level of demand.
Brands must be authentic and values-driven
Over the past few years, brands have become increasingly values-driven. In their 2021 predictions, experts see this trend being pushed even further.
Millennials, which are now the largest generation in the workforce, are shaping society in their own image, and the expectation is that companies have an authentic voice and that actions align with words. This trend is augmented by the transparency that the internet and social media have enabled.
Being a “values-driven” company can mean many things, and often involves focusing on a number of initiatives simultaneously. At the forefront is racial inequality and diversity initiatives, which were a key focus in 2020. According to McKinsey, nine out of ten employees globally believe companies should engage in diversity and inclusion initiatives. When the chorus of voices grows loud enough, eventually actions must follow.
A great rethinking of office life is underway
The great work-from-home experiment will soon be approaching the one-year mark and a lot has changed in a short amount of time.
Even firms that were incredibly resistant to remote work found themselves in a position of having to adapt to new circumstances thanks to COVID-19. Now that the feasibility of at-home work has been proven, it will be tough for companies to walk things back to pre-pandemic times. Over 2021, millions of companies will begin reengineering everything from physical offices to digital infrastructure, and this has broad implications on the economy and our culture.
Individuals and employers start taking wellness seriously
The past year was not good for our collective mental health. In response, many companies are looking at ways to support employees from a health and wellness standpoint. One example is the trend of giving teams access to meditation apps like Headspace and Calm.
This focus on wellness will persist, even as people begin to return to the office. As commercial leases expire in 2021, companies will be re-evaluating their office needs, and many experts believe that wellness will factor into those decisions.
Lastly, this trend ties into the broader theme of values-driven companies. If brands profess a desire to impact society in a positive way, employees expect actions to extend inward as well.
Big Tech backlash continues
Among experts, there’s little doubt that the Big Tech backlash will bleed over into 2021. There is a divergence of opinion on exactly what will happen as a result. There are three general themes:
- 1. Regulators will admonish and threaten Big Tech publicly, but nothing concrete will happen.
- 2. Facebook will be broken up into parts (Facebook, Instagram, and WhatsApp)
- 3. Companies will proactively change their business practices and look for ways to settle quickly
Aside from the thread of regulatory action, the tech sector is facing a bit of an identity crisis. Silicon Valley is grappling with the reality that the center of gravity is shifting. Pitchbook notes that Bay Area will fall below 20% of U.S. deal count for first time, and there have been very public departures from the valley in recent months.
Faced with pressure from a number of different angles, the technology sector may have a year of soul-searching ahead.
The Elephant in the Room
COVID-19 is the one factor that impacts nearly every one of these 2021 predictions, yet, there were few predictions–and certainly no consensus from experts–on vaccine rollouts and case counts. It’s possible that the complexity of the pandemic and the enormous task of dealing with this public health crisis makes it too much of a moving target to predict in specific terms.
In general though, expert opinions on when we’ll return to a more “normal” stage again range from the summer of 2021 to the start of 2022. With the exception of China, most major economies are still grappling with outbreaks and the resulting economic fallout.
It remains to be seen whether COVID-19 will dominate 2022’s predictions, or whether we’ll be able to look beyond the pandemic era.
The Good Stuff: Sources We Like
Of the hundreds of sources we looked at, here were a few that stood out as memorable and comprehensive:
Bloomberg’s Outlook 2021: This article compiled over 500 predictions from Wall Street banks and investment firms.
Kara Swisher and Scott Galloway’s Big 2021 Predictions: Swisher and Galloway combine their deep understanding of the technology ecosystem with frank (and hilarious) commentary to come up with some of the most plausible predictions of 2021. From Robinhood to Twitter, they cover a lot of ground in this interview.
Crystal Ball 2021: Fortune’s annual batch of predictions is always one to watch. It’s comprehensive, succinct, and hits upon a wide variety of topics.
John Battelle’s Predictions 2021: John Battelle has been publishing annual predictions for nearly two decades, and this year’s batch is perhaps the most eagerly anticipated. His predictions are thoughtful, credible, and specific. It’s also worth noting that Battelle circles back and grades his predictions – a level of accountability that is to be praised.
Like this feature? An expanded look at 2021’s predictions will be shared with our VC+ audience later this month.
The Biggest Tech Talent Hubs in the U.S. and Canada
6.5 million skilled tech workers currently work in the U.S. and Canada. Here we look at the largest tech hubs across the two countries
The Biggest Tech Talent Hubs in the U.S. and Canada
The tech workforce just keeps growing. In fact, there are now an estimated 6.5 million tech workers between the U.S. and Canada — 5.5 million of which work in the United States.
This infographic draws from a report by CBRE to determine which tech talent markets in the U.S. and Canada are the largest. The data looks at total workforce in the sector, as well as the change in tech worker population over time in various cities.
The report also classifies which metro areas and regions can rightly be considered tech hubs in the first place, by looking at a variety of factors including cost of living, average educational attainment, and tech employment levels as a share of different industries.
The Top Tech Hubs in the U.S.
Silicon Valley, in California’s Bay Area, remains the most prominent (and expensive) U.S. tech hub, with a talent pool of nearly 380,000 tech workers.
Here’s a look at the top tech talent markets in the country in terms of total worker population:
|🇺🇸 Market||Total Tech Talent||% Talent Growth (2016-2021)|
|SF Bay Area||378,870||13%|
|New York Metro||344,520||3%|
|Salt Lake City||55,930||29%|
America’s large, coastal cities still contain the lion’s share of tech talent, but mid-sized tech hubs like Salt Lake City, Portland, and Denver have put up strong growth numbers in recent years. Seattle, which is home to both Amazon and Microsoft, posted an impressive 32% growth rate over the last five years.
Emerging tech hubs include areas like Raleigh-Durham. The two cities have nearly 70,000 employed tech workers and a strong talent pipeline, seeing a 28% increase in degree completions in fields like Math/Statistics and Computer Engineering year-over-year to 2020. In fact, the entire state of North Carolina is becoming an increasingly attractive business hub.
Houston was the one city on this list that had a negative growth rate, at -2%.
The Top Tech Hubs in Canada
Tech giants like Google, Meta, and Amazon are continuously and aggressively growing their presence in Canada, further solidifying the country’s status as the next big destination for tech talent. Here are the country’s four tech hubs with a total worker population of more than 50,000:
|🇨🇦 Market||Total Tech Talent||% Talent Growth (2016-2021)|
Toronto saw the most absolute growth tech positions in 2021, adding 88,900 jobs. The tech sector in Canada’s largest city has seen a lot of momentum in recent years, and is now ranked by CBRE as North America’s #3 tech hub, after the SF Bay Area and New York City.
Vancouver’s tech talent population increased the most from its original figure, climbing 63%. Seattle-based companies like Microsoft and Amazon have established sizable offices in the city, adding to the already thriving tech scene. Furthermore, Google is set to build a submarine high-speed fiber optic cable connecting Canada to Asia, with a terminus in Vancouver.
Not to be left behind, Ottawa has also taken giant strides to increase their tech talent and stamp their presence. The country’s capital even has the highest concentration of tech employment in its workforce, thanks in part to the success of Shopify.
The small, but well-known tech hub of Waterloo also had a very high concentration on tech employment (9.6%). The region has seen its tech workforce grow by 8% over the past five years.
Six out of the top 10 cities by tech workforce concentration are located in Canada.
Evolution of Tech Hubs
The post-COVID era has seen a shifting definition of what a tech hub means. It’s clear that remote work is here to stay, and as workers migrate to chase affordability and comfort, traditional tech hubs are seeing some decline — or at least slower growth — in their population of tech workers.
While it isn’t evident that there is a mass exodus of tech talent from traditional coastal hubs, the rise in high-paying tech jobs in smaller markets across the country could point to a trend and is positive for the industry.
While more workers with great talent, resources, and education continue to opt for cost-friendly places to reside and work remotely, will newer markets like Charlotte, Tennessee, and Calgary see a rise of tech companies, or will large corporations and startups alike continue to opt for the larger cities on the coast?
Animation: Visualizing U.S. Interest Rates Since 2020
U.S. interest rates have risen sharply after sitting near historic lows. This animation charts their trajectory since 2020.
Visualizing Interest Rates Since 2020
In March 2020, the U.S. Federal Reserve cut already depressed interest rates to historic lows amid an unraveling COVID-19 pandemic.
Fast-forward to 2022, and the central bank is grappling with a very different economic situation that includes high inflation, low unemployment, and increasing wage growth. Given these conditions, it raised interest rates to 2.25% up from 0% in just five months.
The above visualization from Jan Varsava shows U.S. interest rates over the last two years along with its impact on Treasury yields, often considered a key indicator for the economy.
Timeline of Interest Rates
Below, we show how U.S. interest rates have changed over the course of the pandemic:
|Date||Federal Funds Rate (Range)||Rate Change (bps)|
|July 27, 2022||2.25% to 2.50%||+75|
|June 16, 2022||1.50% to 1.75%||+75|
|May 5, 2022||0.75% to 1.00%||+50|
|March 17, 2022||0.25% to 0.50%||+25|
|March 16, 2020||0.00% to 0.25%||-100|
|March 3, 2020||1.00% to 1.25%||-150|
In early 2020, the Federal Reserve cut interest rates from 1% to 0% in emergency meetings. The U.S. economy then jumped back from its shortest recession ever recorded, partially supported by massive policy stimulus.
But by 2022, as the inflation rate hit 40-year highs, the central bank had to make its first rate increase in over two years. During the following Federal Reserve meetings, interest rates were then hiked 50 basis points, and then 75 basis points two times shortly after.
Despite these efforts to rein in inflation, price pressures remain high. The war in Ukraine, supply disruptions, and rising demand all contribute to higher prices, along with increasing public-debt loads. In fact, a Federal Reserve estimate suggests that inflation was 2.5% higher due to the $1.9 trillion stimulus, an effect of “fiscal inflation.”
Impact on the Treasury Yield Curve
The sharp rise in interest rates has sent shockwaves through markets. The S&P 500 Index has steadily declined 19% year-to-date, and the NASDAQ Composite Index has fallen over 27%.
Bond markets are also showing signs of uncertainty, with the 10-year minus 2-year Treasury yield curve acting as a prime example. This yield curve subtracts the return on short-term government bonds from long-term government bonds.
When long-term bond yields are lower than short-term yields—in other words, the yield curve inverts—it indicates that markets predict slower future growth. In recent history, the yield curve inverting has often signaled a recession. The table below shows periods of yield curve inversions for one month or more since 1978.
|Yield Curve Inversion Date||Number of Months||Maximum Difference (10 yr - 2 yr bps)|
*Data as of September 9, 2022
Source: Federal Reserve
For example, the yield curve inverted in February 2000 to a bottom of -51 basis points difference between the 10-year Treasury yield and the 2-year Treasury yield. In March 2001, the U.S. economy went into recession as the Dotcom Bubble burst.
More recently, the yield curve has inverted to its steepest level in two decades.
This trend is extending to other countries as well. Both New Zealand and the UK’s yield curves inverted in August. In Australia, the yield spread between 3-year and 10-year bond futures—its primary measure—was at its narrowest in a decade.
What’s On the Horizon?
Sustained Treasury yield inversions have sometimes occurred after tightening monetary policy.
In both 1980 and 2000, the Federal Reserve increased interest rates to fight inflation. For instance, when interest rates jumped to 20% in 1981 under Federal Reserve Chairman Paul Volcker, the U.S. Treasury yield inverted over 150 basis points.
This suggests that monetary policy can have a large impact on the direction of the yield curve. That’s because short-term interest rates rise when the central bank raises interest rates to combat inflation.
On the flip side, long-term bonds like the 10-year Treasury yield can be affected by growth prospects and market sentiment. If growth expectations are low and market uncertainty is high, it may cause yields to fall. Taken together, whether or not the economy could be headed for a recession remains unclear.
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