2022 Summarized in 10 Charts
Markets Summarized
1️⃣ Interest Rates
Money printer on the cool down: Until 2022, the Fed kept interest rates near 0% to combat the economic repercussions of COVID. However, low-interest rates and other macro factors (e.g., Russia’s invasion of Ukraine and supply shortages) have created a high inflationary environment. To keep inflation from spiraling out of control, the fed has drastically hiked interest rates (federal funds rate) to ~4% from ~0.1% a year earlier.
Rising interest rates have made borrowing capital increasingly difficult for individuals and businesses. For instance, a typical mortgage loan costing households ~3.5% interest payments will now cost ~7% — 2x increase in interest payments. As for some enterprises, borrowing capital is four times more expensive now than in January earlier this year. Yikes!
2️⃣ Energy Prices
Limited supply & high demand: Energy prices across the EU have dramatically increased over the past few months. Since 2021, energy prices in the EU were already on an upwards trajectory due to a prolonged winter and low gas storage levels. However, Russia’s invasion of Ukraine worsened the situation for the EU, which ultimately had to boycott its largest source of natural gas.
For the long-term, the EU needs to devise a sustainable plan for its energy supply, potentially doubling down on its renewable energy efforts, and seeking partnerships beyond Russia to diversify its energy sources.
3️⃣ Tech sell-off
What goes up must come down: The technology sector benefitted the most from the pandemic — NASDAQ (tech-heavy stock index) was up by ~ 50% in 2020 and 30% in 2019. However, with a weak macroeconomic outlook, investors find it difficult to justify the inflated tech valuations, leading to > $ 3 Trillion in tech stock wipeout.
Now, tech companies are looking into cutting costs as their growth starts to slow in the near term. Unfortunately, cost-cutting has led to a large-scale layoffs across the industry, as employee compensation comprises majority of the tech firms' costs.
Consumer Trends Summarized
4️⃣ WFH
WFH here to stay: Even after the pandemic, employees are increasingly opting to work from home as it is “cheaper”, and more “convenient”. To accommodate these needs, firms have started to provide hybrid work options (e.g., 2-3 days WFH), with some eliminating the need to work from the office (e.g., Spotify).
Remote work is here for the long term as firms seek to cut rent costs and digitize operations, employees seek more flexibility, and new startups seek to build products to make remote work more convenient.
5️⃣ Online to Offline (O2O) Retail
O2O retail on the rise: Instead of pivoting entirely into an e-commerce model, retailers are utilizing e-commerce and brick/mortar stores as complementary channels to grow revenue. As a result, a new, growing retail model (O2O model) has emerged where retailers utilize e-commerce channels to raise brand awareness, ultimately channeling customers to purchase in-store.
For example, O2O model is growing in prominence in the fashion and grocery segments, where consumers still prefer to making purchases at physical stores. Retailers are capitalizing on this customer behavior, and are experimenting different concepts to successfully monetize from this emerging O2O model:
“Amazon’s 2017 acquisition of Whole Foods for $13.7 billion … The purchase immediately added 464 brick and mortar locations to the company, which means the online giant can now integrate these stores with its eCommerce presence and use them for click-and-collect pick up and as warehouses to improve fulfillment.” — Tradegecko
Sustainability Trends Summarized
6️⃣ Renewable Energy
Renewable energy’s growth to continue: 2022 has been a great year for renewable energy — installed capacity for renewable energy has increased by 8% globally, driven primarily by solar power. More importantly, renewable energy contributed 29% (highest ever) to the global grid. In other words, renewable energy is increasingly becoming a viable alternative to fossil fuels as its prices continue to drop with continuous innovation.
7️⃣ Growth of EV
A lot of room for growth: EV sales have skyrocketed in recent years. EV cars have become more accessible to consumers as the cost of owning an EV has drastically decreased over the past three years. Additionally, the number of charging stations has increased exponentially, reducing the widespread "range anxiety" associated with an EV.
The shift towards EV is still in its early stages. I foresee EV penetration to dramatically increase in the coming decade as Gen Zs (more sustainability conscious) enter the workforce in large numbers and have increasing purchasing power.
Tech Trends Summarized
8️⃣ 3nm Chips
Deviating from Moore’s law : Moore’s law predicts that the number of transistors on a microchip doubles every two years. However, we are already experiencing a break from this law.
For instance, TSMC (largest semiconductor foundry) recently announced that it will begin its production of 3nm chips, but there are a couple of issues with this:
“TSMC tries to maintain a two-year cadence for process nodes, but its latest disclosures indicate 3nm production chips will ship in 2Q23, three years after 5nm.
Not only is 3nm later, but it’ll be worse than expected. In updated projections, TSMC trimmed its targeted improvements in density, speed, and power by about 10%. It had previously admitted density would fall short of the usual 2x gain, but the new figure is only 1.6x” — Tech Insights
In the grand scheme of things, deviation from Moore’s law does not matter. Instead, what matters is that we cannot rely on our current silicon technology to push the boundary for computing power constantly. Eventually, we will transition into quantum/molecular computing, which overcomes computing limitations associated with our current technology.
"In about ten years or so, we will see the collapse of Moore's law. In fact all ready we see a slowing down of Moore's law. Computer power simply cannot maintain its rapid exponential rise using standard silicon technology" — Michio Kaku
9️⃣ AI Uptake increasing
AI the way forward: COVID has accelerated the need for businesses to become more digitally savvy. In 2022, corporations have increasingly focused on digitizing day-to-day activities by adopting AI. For instance, enterprises are rapidly incorporating AI into automating customer services and enhancing customer analytics, crucial areas to build a successful service business. As AI tech continues to improve, I am excited about the different use cases such a technology would bring for companies across multiple sectors.
🔟 Rising 5G adoption
5G going mainstream: On the backdrop of 5G network rollout by Telecoms and increasing number of smartphones equipped with 5G capabilities, 5G adoption has doubled in 2022 to ~1 billion users. 5G, like its predecessors, will become mainstream in the coming years as the cost of 5G service continues to decline with economies of scale.