Forecasting the world in 2022

This is an audio transcript of the FT News Briefing podcast episode: Forecasting the world in 2022

Marc Filippino
Good morning from the Financial Times. Today is Monday, January 3rd, and this is your FT News Briefing.

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The US is getting absolutely slammed by Omicron. And Tesla is leading the electric vehicle charge, but how long will its reign last? Plus, 2022 is starting off with a lot of Covid news, inflation news and the possibility that volatile equities will stick around. So the FT is gonna predict how these stories will play out this year.

Neil Buckley
We’re trying not to be doomsters and gloomsters but, you know, realistic, that’s what we’re aiming for.

Marc Filippino
I’m Marc Filippino and here’s the news you need to start your day.

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The US is experiencing record high Covid cases because of the Omicron variant. The seven-day rolling average of cases was close to 400,000 on Saturday. It’s the highest daily total since the start of the pandemic. The FT’s Stefania Palma is reporting on the Omicron surge and says it’s even taken top officials by surprise.

Stefania Palma
So Anthony Fauci, who is Joe Biden’s chief medical adviser, on Sunday, actually said that without a doubt the acceleration of cases we’ve seen in the US “is really unprecedented and has gone well beyond anything we have seen before”, which I think really was a call for concern. Fauci also sort of made the point that he was very, very concerned about the potential straining on the hospital system.

Marc Filippino
So Stefania, the Center[s] for Disease Control and Prevention shortened the isolation guidelines last week for anyone testing positive. It’s down from 10 days to five days if the person who tested positive has no symptoms. Now, a lot of people are unhappy with the CDC for this recommendation. Is the agency reconsidering it?

Stefania Palma
It’s quite interesting, Marc, actually, because we now, Fauci is sort of signalling that there might be a bit of a U-turn on these recently issued guidelines on Sunday when asked about actually the pushback that there’s been to this loosening of the rules. Fauci said that requiring testing at the end of this five day period is actually now under consideration, so it’s very clear that the CDC is obviously revisiting the new guidelines that you’ve just mentioned.

Marc Filippino
Now how has the surge affected businesses? I know airlines, for one, have been hit pretty hard.

Stefania Palma
So because of this latest surge, there’s been enormous disruption. Even when looking at just this past weekend for New Year’s, thousands of US flights have been disrupted. That is obviously going to have a knock-on effect on airlines, but also, I think on any kind of business who is obviously having a number of employees dotted across the US and the world, frankly, during the holidays.

Marc Filippino
Stefania Palma is usually our US legal and enforcement correspondent. Today she’s covering the Omicron variant. Thanks, Stefania.

Stefania Palma
Thank you.

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Marc Filippino
Tesla smashed its own production and delivery records at the end of last year. The electric carmaker posted fourth quarter numbers and it boasted 40,000 more deliveries above the average Wall Street estimate. The boom isn’t just a mark of success for Tesla, it’s also an indication that the appetite for electric vehicles is getting stronger. And while the FT’s Richard Waters says Tesla is still leading the pack, the competition is creeping into its rear-view mirror.

Richard Waters
You know, the Tesla story is at a pivotal moment, really, because we now know that they can produce, we know that demand is very high. But this is also the point at which we are expecting some serious competition. In electric pick-up trucks, for instance, Rivian is already out. Ford, with its very popular F-150, has an electric version due in the spring. Now, we don’t know whether those companies can really scale their production. But you know, I think the key here is that they are getting out ahead of Tesla’s Cybertruck. So this is one very popular category where Tesla will not be the first to reach production.

Marc Filippino
But Richard says, don’t underestimate the head start that Tesla has.

Richard Waters
So this is an uncertain year for Tesla because they’re slower with some of their newer models and competition is rising. So to start the year on such a strong note, and I think this shows, you know, where their advantage lies now, that they can produce at scale, their cost to lower their margins are strong. They are, you know, they’ve hit their groove at a time when the rest of the industry is only just trying to scale up.

Marc Filippino
Richard Waters is the FT’s west coast editor.

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2022 is already off to a busy start when it comes to news. At the FT, we want to know how some of the top stories will shake out as the year goes on. That’s why we asked our top columnists and reporters to make predictions for the upcoming year. Joining us now is the guy who helped compile these predictions, the FT’s chief leader writer Neil Buckley.

Marc Filippino
Hey, Neil.

Neil Buckley
Hi!

Marc Filippino
So Neil, leading up to Christmas, the big worry was the Omicron variant that has spilled over into 2022. Before Omicron, it was the Delta variant. Should we be worried about another dangerous variant this year?

Neil Buckley
Yes, we asked that question of Clive Cookson, our science editor, and his answer is that we should be worried. You know, there are still so many millions of people who are unvaccinated in the world. The possibility of further mutations is very high and there is a danger therefore that we could see something that is worse even than Omicron. And that is Clive’s prediction, that yes we will. But it does depend, of course, on whether we can get more vaccinations out to more people, particularly in the developing countries where rates of vaccination are extremely low. And the extent to which richer world countries as well are able to restrain the spread of Omicron and get more boosters into their populations so that we can start to bring Covid infections down worldwide.

Marc Filippino
And whether or not Omicron settles down or another variant ramps up, it has an effect on how central banks react. The Federal Reserve has to deal with the rate of recovery and also one of the other big concerns of 2021, inflation. The Fed expects to raise interest rates three times this year. Will it be enough to get inflation back around the Fed’s 2 per cent target?

Neil Buckley
Well, what our forecast is saying, and this is done by Martin Wolf, our chief economic commentator, is that he doesn’t believe that inflation will be back at the Federal Reserve’s 2 per cent target by the year-end, even with the three tightenings that are now forecast. Of course, an awful lot does depend on Omicron, and Martin is saying that, you know, it’s possible that that won’t be as bad as we fear and that supply chains will start to recover and the kind of shortages we saw last year because of supply chain issues will prove to be temporary. But he says there’s a number of other factors. The labour market is very hot at the moment. Unemployment is very low. There are high vacancy rates in the economy at the moment that can put pressure on inflation. And Martin’s view is that even what is currently envisaged from the Fed is not going to be enough to get back to target.

Marc Filippino
Hmm. Turning now to markets, the S&P hit new high after new high in 2021. Will that continue in 2022 or is it going to dip? And if it does dip, how bad is it gonna be?

Neil Buckley
Well, I think it’s not an unconnected question at all because the level of interest rates is obviously one of the two or three key things that investors are watching for the coming year. So we pose the question on the S&P 500 to our markets editor Katie Martin asking whether she thought that the S&P 500 was going to fall by more than 10 per cent. Katie says yes, she thinks it will and is citing inflation as one of the key issues or rather the fact that the US Federal Reserve is going to be forced to hit the monetary brakes in order to cool inflation. And that is, inevitably, we think, going to have an impact on equities. We’ve seen them go up and up the bull run go on for a very long time. Our forecast is that is going to reverse this year, although we only put the question at 10 per cent, not 20 per cent. So it’s not we’re not forecasting at the moment that that we will go into a bear market.

Marc Filippino
Well, we have Katie on weekly here at the FT News Briefing and she is a little bit of doom and gloom, so I’ll have to have a word with her when we have her on this week.

Neil Buckley
We’re trying not to be doomsters and gloomsters, but you know, realistic, that’s what we’re aiming for.

Marc Filippino
Neil Buckley is the FT’s chief leader writer. Thank you, Neil.

Neil Buckley
Thank you.

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Marc Filippino
You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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