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Prediction Consensus: What the Experts See Coming in 2022

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What the Experts See Coming in 2022

Even at the best of times, it’s human nature to want to decode the future.

During times of uncertainty though, we’re even more eager to predict what’s to come. To satisfy this demand, thousands of prognosticators share their views publicly as one year closes and another begins. In hindsight, we see varying levels of success at predicting the future.

In truth, experts are merely guessing at what will happen over the coming year. In 2020, almost nobody had a pandemic on their bingo card. In 2021, NFTs completely flew under the radar of experts, and nobody saw a container ship get lodged in the Suez Canal in their crystal ball.

So, why should we pay any attention to predictions at all? Are they, as Barry Ritholtz says, “wrong, random, or worse”?

For one, these guesses are backed by expertise and experience, so the accompanying analysis is informative. Perhaps more importantly though, influential people and companies are in a position to shape the future with their predictions. In some cases, sentiment and actions can turn a prediction into a self-fulfilling prophecy.

Regardless, whether for research or pure entertainment purposes, we’ve sifted through hundreds of reports, interviews, and articles to see which predictions are generally the most agreed upon. Where do experts see the ball moving over the next year? Our bingo card sums up the top 25, and below, we’ll dig into some of the trends that could shape 2022.

Want to dive deeper into this year’s predictions?
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Vibe Check: What’s the General Outlook for 2022?

Based on the hundreds of predictions we analyzed, the general mood can be described as cautiously optimistic.

For starters, the global economy will likely keep growing, but not at the rate it did in 2021. We aggregated 40+ predictions from reputable sources such as the IMF and Goldman Sachs to determine median GDP estimates for the world, and select regions:

Country / RegionMedian GDP Estimate
World4.5%
United States4.0%
Eurozone4.3%
China5.3%

Next, there’s broad agreement that monetary policy will begin to tighten over the next 12 months. Here’s what major central banks are predicted to do:

removal of monetary accommodation

Multiple experts described an era of lower equity returns and increased volatility. Many of the issues that plagued 2021 have carried over into 2022.

Technological disruption continues to reshape industries, and climate change and cybersecurity issues will be top of mind this year. Geopolitical tensions are heating up as well, now that countries have acclimated to the immediate challenges posed by the pandemic.

In short, nobody expects 2022 to be uneventful.

Trends that Will Shape 2022

Some of the predictions above are straightforward. GDP targets and explicit binary statements don’t require too much explanation.

Below are some of the predictions experts agreed on that are worth digging into in more detail:

1. Geopolitical Tensions Will Flare Up

There are a number of potential hotspots around the world, but here are a few that experts are watching in 2022.

Iran: Tensions ratcheted up between the U.S. and Iran after an attack on a U.S. military base in southern Syria in the fall of 2021. Further, the tension between Iran and Israel has the potential to escalate further in 2022, drawing in other nations in the region into a conflict.

iran geopolitical tensions

Ukraine: This is a continuation of tensions that flared up after Russian annexation of Crimea in 2014. Europe’s dependence on Russian gas and Ukraine’s position as a key gas transit hub makes this a situation experts are watching very closely.

Taiwan: The risk that China will make a move on Taiwan has elevated in the minds of experts, though actions may contain “more bark than bite”.

2. China’s Rocky Start to 2022

At the dawn of 2021, many of the predictions around China were largely optimistic as the country had entered a recovery phase sooner than the rest of the world.

Fast forward to 2022, and the predictions are the polar opposite as China faces challenges on a number of fronts. To begin with, there is pessimism around China’s zero-COVID strategy, which even today sees entire cities fall under strict lockdown orders. This strategy has unavoidable economic impacts.

china's rocky start to 2022

Secondly, uncertainty around power shortages, a potential housing crisis, and regulatory crackdowns have dampened enthusiasm for the country’s near-term prospects.

Finally, Xi Jinping eliminated term limits on the presidency in 2018, potentially positioning himself to lead China indefinitely. As the Chinese Communist Party’s 20th National Party Congress approaches later in the year, if the country is still on uncertain footing, it could create a tense political atmosphere in Beijing.

3. The Year of the Worker

shifting labor dynamics

Labor dynamics have stayed in the spotlight since the pandemic upended the world of work. There are a number of trends that emerge from this broader theme:

  • The labor shortages that emerged during the pandemic will remain in place in 2022 and beyond. Certain sectors, such as cybersecurity, are facing acute shortages of skilled workers
  • There is a broad consensus that the future of office work is “hybrid”. Companies that don’t offer flexibility will face a disadvantage in attracting talent
  • The internet and social media have opened up a number of career pathways for individuals to earn an income beyond simply working for a company
  • Work/life balance and burnout will be central points in discussions around workplace culture

4. The Changing Digital Ecosystem

If predictions are any indication, we’ll be hearing a lot more about NFTs and Web3. There are plenty of opinions on the former, and they run the spectrum from exuberant to outright bearish. Whether the hype surrounding profile picture NFTs dies down is anyone’s guess, but the technology has opened the door to a lot of experimentation for artists and creators.

creator economy 2022

On that note, experts are generally excited about the prospects of the burgeoning “Creator Economy”—a catch-all term describing the new technological ecosystem and growing infrastructure that is allowing individual content creators to monetize and flourish.

Another trend that is picking up steam is ecommerce centered around social media. The ability to purchase products straight from influencers is becoming more common on major social platforms, and ecommerce companies are creating more products to support influencers in their marketing endeavors.

By 2026, Gartner estimates that 60% of Millennial and Gen Z consumers will prefer making purchases on social platforms over traditional digital commerce platforms.

5. Inflation Slowly Eases Off

Worries about inflation have always cropped up here and there, but in countries like the U.S., truly damaging amounts of inflation haven’t been seen since the 1980s.

Last year, the narrative changed.

After trillions of dollars of pandemic stimulus and borrowing, inflation suddenly came back on the radar—and it was not “transitory” as early central bank statements hoped. Now, going into 2022, experts expect higher-than-normal inflation levels to continue.

Inflation Slowly Eases Off

While inflation is expected to have an impact going forward, experts also see it leveling off (relative to 2021) as supply chain disruptions work themselves out.

6. Another Banner Year of Electric Vehicles

As climate change dominates more of the spotlight in 2022, regulatory actions will force automakers to consider the future of their fossil-fuel models.

Even as incentives are slowly rolled back in a number of markets, EV sales are expected to set new records this year. As well, electrification of fleets will be a trend that gathers momentum.

electric vehicles and battery metals

Industrial and battery metals like lithium and cobalt surged by 477% and 208%, respectively, in 2021, a trend that many experts believe will stretch into 2022.

The Good Stuff

Of the hundreds of sources we looked at, here were a few that stood out as memorable and comprehensive:

  • Bloomberg’s Outlook 2022: This article compiled over 500 predictions from Wall Street banks and investment firms.
  • The All-In Podcast’s 2022 predictions: This lively podcast, featuring Chamath Palihapitiya, Jason Calacanis, David Sacks, and David Friedberg, is always entertaining and informative. In this predictions episode, biggest business winners and losers is great, as is best performing asset.
  • Eurasia Group’s Top Risks for 2022: This comprehensive group of articles covers a lot of ground, and offers up some very credible predictions as to what might happen on the world stage this year.
  • Wood Mackenzie’s Predictions for 2022: Wood Mackenzie analysts offer 10 predictions for key developments expected in the energy and natural resources industries in 2022.

Lastly, if you’ve found our Prediction Consensus useful, we’re going to be diving even deeper into this subject matter in the coming weeks.

Our VC+ members get access to the whole Global Forecast 2022 series, which features a webinar and additional articles that flesh out predictions for the coming year in even more detail. You can learn more about it here.

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Markets

Beyond Big Names: The Case for Small- and Mid-Cap Stocks

Small- and mid-cap stocks have historically outperformed large caps. What are the opportunities and risks to consider?

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A line chart showing the historical return performance of small-, mid-, and large-cap stocks.

 

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The following content is sponsored by New York Life Investments
An infographic comparing low-, mid-, and large-cap stocks, including an area graph showing historical returns, a bubble chart showing how much $100 would be worth over 35 years, a horizontal bar graph showing annualized volatility, and a line graph showing relative forward price-to-earnings ratios, that together show that mid-cap stocks present a compelling investment opportunity.

Beyond Big Names: The Case for Small- and Mid-Cap Stocks

Over the last 35 years, small- and mid-cap stocks have outperformed large caps, making them an attractive choice for investors.

According to data from Yahoo Finance, from February 1989 to February 2024, large-cap stocks returned +1,664% versus +2,062% for small caps and +3,176% for mid caps.  

This graphic, sponsored by New York Life Investments, explores their return potential along with the risks to consider.

Higher Historical Returns

If you made a $100 investment in baskets of small-, mid-, and large-cap stocks in February 1989, what would each grouping be worth today?

Small CapsMid CapsLarge Caps
Starting value (February 1989)$100$100$100
Ending value (February 2024)$2,162$3,276$1,764

Source: Yahoo Finance (2024). Small caps, mid caps, and large caps are represented by the S&P 600, S&P 400, and S&P 500 respectively.

Mid caps delivered the strongest performance since 1989, generating 86% more than large caps.

This superior historical track record is likely the result of the unique position mid-cap companies find themselves in. Mid-cap firms have generally successfully navigated early stage growth and are typically well-funded relative to small caps. And yet they are more dynamic and nimble than large-cap companies, allowing them to respond quicker to the market cycle.

Small caps also outperformed over this timeframe. They earned 23% more than large caps. 

Higher Volatility

However, higher historical returns of small- and mid-cap stocks came with increased risk. They both endured greater volatility than large caps. 

Small CapsMid CapsLarge Caps
Total Volatility18.9%17.4%14.8%

Source: Yahoo Finance (2024). Small caps, mid caps, and large caps are represented by the S&P 600, S&P 400, and S&P 500 respectively.

Small-cap companies are typically earlier in their life cycle and tend to have thinner financial cushions to withstand periods of loss relative to large caps. As a result, they are usually the most volatile group followed by mid caps. Large-cap companies, as more mature and established players, exhibit the most stability in their stock prices.

Investing in small caps and mid caps requires a higher risk tolerance to withstand their price swings. For investors with longer time horizons who are capable of enduring higher risk, current market pricing strengthens the case for stocks of smaller companies.

Attractive Valuations

Large-cap stocks have historically high valuations, with their forward price-to-earnings ratio (P/E ratio) trading above their 10-year average, according to analysis conducted by FactSet.

Conversely, the forward P/E ratios of small- and mid-cap stocks seem to be presenting a compelling entry point. 

Small Caps/Large CapsMid Caps/Large Caps
Relative Forward P/E Ratios0.710.75
Discount29%25%

Source: Yardeni Research (2024). Small caps, mid caps, and large caps are represented by the S&P 600, S&P 400, and S&P 500 respectively.

Looking at both groups’ relative forward P/E ratios (small-cap P/E ratio divided by large-cap P/E ratio, and mid-cap P/E ratio divided by large-cap P/E ratio), small and mid caps are trading at their steepest discounts versus large caps since the early 2000s.

Discovering Small- and Mid-Cap Stocks

Growth-oriented investors looking to add equity exposure could consider incorporating small and mid caps into their portfolios.

With superior historical returns and relatively attractive valuations, small- and mid-cap stocks present a compelling opportunity for investors capable of tolerating greater volatility.

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