The dawn of a new year is often full of anticipation, speculation and predictions for the coming months. Which trends will we still be talking about in December, which will fall by the wayside by March. Fortunately, nobody has a crystal ball full of the answers we seek - but it’s always interesting to hear fresh perspectives on what may be down the road. We asked Yuri what's he is thinking about for 2022 to get his take on the year ahead.
Web 3.0
Looks like Web 3.0 is a thing and here to stay. Certainly a few big winners so far (at least on paper) but some Incomprehensibly big winners with valuations that make little sense. No losers as of yet but it is early. Almost impossible to predict who wins in this space. This is like cannabis 3 years ago… getting multiple pitches a day, hard to predict winners, no one has enough credibility in the space because it is new, and every investor has massive FOMO. Hence the silly valuations, and sophisticated investors doing the VC-equivalent of lining up overnight to pre-buy a condo that won’t be built for 5 years.
Interest Rates
Interest rates are shifting. Nowhere to go but up, the question is how fast. It’s been so long since we saw rates that started with a 5, let alone anything higher that, I’m not sure anyone knows what it means. Valuation multiples in traditional businesses sure haven’t factored in a much-inflated cost of debt. 200-300bps makes a meaningful change in IRR for private equity. Return profiles are changing for sure.
COVID Fallout
COVID aftermath/length unknown. Businesses have been remarkably resilient and governments have been extraordinarily generous to both business and individuals. Can’t and won’t last. There’s a few consequences:
- What are the permanent changes in consumer behaviour? We know everyone got into delivery/take out of everything including toothpaste, but what really happens long term? Does this mean traditional industries take a valuation hit in advance of a revenue decline, or does it mean private equity will be sitting on seriously depreciating assets? Aren’t they already?
- What are the real consequences for businesses that cannot find adequate staffing? Lots of customers and no staff feels like a good problem to have … but lots of people in the oil fields in Alberta will remember it didn’t work out so well. This could be the great labour shortage of our time. Big increase in labour costs are a certainty. Dust the ping pong table off in the workplace for sure (kidding) … but really it will be employees working less hours (perhaps materially) for more money (absolutely materially). And they’re not going to be bought off with beer pong and kombucha on tap. Anymore.
- What are the short, medium and long-term tax hikes that are most definitely coming our way. Change in the capital gains inclusion rate is an absolute no brainer for government. Low political fallout, big revenue source. This will just be the start. Get used to making materially less money on a post-tax basis.
As our social norms continue to shift and the pandemic shapes our future workplaces, who knows what the metaverse holds for us all.
Did we miss a big one? Do you see something we missed? Connect and comment on LinkedIn to share your big trend predictions for 2022.
