Roll On 2021!

Cassandra cried, and curs’d th’ unhappy hour;
Foretold our fate; but, by the god’s decree,
All heard, and none believ’d the prophecy.

2020 is finally over and the long-awaited 2021 has arrived. Let’s begin the countdown to disappointment. Here are my predictions for this year.

COVID is here to stay

Rich countries will vaccinate their populations; there will be delays and fuckups along the way, but it will get done, give or take a few anti-vaccer fruitcakes. Poor countries will not. The virus will find a permanent home in Africa, parts of Asia and South America where it will carry on mutating. We will eventually find a sort of equilibrium with COVID, like we did with the flu, where vaccines just manage to stay half a step ahead of the virus. The term flu season will have to be extended to include various strains of the coronavirus.

Global economy will recover

But it will take more than one year to get back to pre-COVID levels. Whatever fiscal firepower the G20 still had, and I didn’t think there was much to begin with, that is now all gone. The monetary policy is close to its limit, and I don’t think we will invent the permanent household-grade fusion reactor this year. So it looks like we’ll have to dig ourselves out of this shithole the old fashioned way.

The routing of the middle class will accelerate

This working from home in our pants thing that we have come to appreciate so much is teaching our employers what else can be outsourced to India, Nigeria, Bulgaria and such. And – surprise, surprise! – it’s pretty much every fucking desk job there is. It will start slow, with multinationals “rationalising geographically” new job creation without embarking on expensive redundancy programmes, business to business and professional services will follow suit shifting more of their junior roles to lower paid areas… We’re not totally screwed just yet, but a snowball it is, and roll down the hill it does.

Interest rates will stay low for a few years yet

Rich western economies are in debt up to their teeth and can only afford to service their debt if interest rates remain low until inflation erodes the principal to a manageable level. No central bank will risk causing a downgrade of their country’s sovereign rating by hiking interest rates too soon. When you take this into account, shares no longer look all that expensive.

Low inflation is no longer a priority

In an economic recovery scenario, inflation will be allowed to run above target, yet investment grade bond yields will remain low. Because: insurance companies and defined benefit pension schemes have nothing else to invest in.

Stealth taxes

The Chancellor will have to find new and creative sneaky ways to raise revenue. I don’t expect any news in the spring 2021 budget statement, but come autumn I’ll be watching for warning signs. The annual pension allowance, ISA allowance and capital gains allowance are obvious candidates. Not moving the tax bands in tandem with inflation is an old Tory favourite. Also, something will have to be done about the taxation of the self-employed, hence further restrictions on single-director companies might be on the cards.

Am I right? Time will tell, I guess. 🖖


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