Bloomberg Your need-to-know guide to trends, Businessweek themes, and people sone __ SPECIAL ISSUE,How can | prosper in changing markets? Should | adjust my portfolio? How do | come out ahead? For some of life’s questions, you're not alone. Together we can find an answer. © UBS 2022. All rights reserved.HE YEAR AHEAD wm COVER TRAIL| ‘etsmede. “sothisweeksthe Yer Ahend se” Yee! Ananmual readin, What's ontlook for 2022 Wel we've got some eecions, were ‘ecovering oma new (Covid vara theres infaion: “baa var “Youn what hey says hstory repeats isl “Hm, whatifcoers repeated hers? aig BACK THROUGH THE LOOKING GLASS 2 | avtarseratets of ‘mekerkerectdon a dre tom, Kemenber ECONOMICS] FLYING TAXIS serie Aad ae ANDPOLITICS Tharsright, fyingtaxis! 36 | “ime trom he fue Meacronsace Taio Tole 3 Howjoby Aviation goteary aude | Se, ‘How Democrats can winthe midterms m1 ‘Regulation for thelJetsons era 38 | matebemagune Something. the Middle East i Startupstockshavetroubletakingof 38) Grveyearwe made Get ready for theend ofstimulus — a SEV Ie eo) |S ST China sees diminishing returns from Covidzero 14 Introducing the “vertiport” 40 a ‘Nuclear power makes a comeback 5 FINTECH eee Investors stay on the sidelines in India 16 Whoneedsa bank, anyway? BR naa Hot Seat: South Africa’s Cyril Ramaphosa 17 Buynow, pay lateris credit, Kids a a Alleyes on Georgia in November 18 The big boys are fighting back | | seismic 2 CONSUMER Gary Gensler. the robots ag | “Teves The EV truck race ison EL) te Ces Pass the popcorn—in a theater, please Realestatekeepsit, well,real_ 48 ‘Alkinder, gentler fur HotSeat: Cryptoenhanges 49 ‘Hot Seat: Biogen’s Alzheimer’s drug 23 GREEN Air travelis down, but Wizx Airis...expanding? 25 Taking carbon capture seriously 50 The stakes get higher for Macau's casinos 26 Tesla’s power play BD That time we all really needed a drink 27 ‘Americans want EVs—just make them big 53 TECHNOLOGY LUXURY Abbrand-new web, or more of the same? 28 Overlanding: The posh way to rough it 36 ‘The Facebook election season isback. Gulp 30 Brooklyn's alt-dairy kingdom 58 Hot Seat: Instacart’s Fidji Simo 31 Who's bidding at Sotheby's and Christie's 58 Sorry, Intel, you get to playfrom behindnow 32 There’smoreto Hawaiithanluausandleis 60 ‘Tuck in for some lab-grown grilled chicken 32 HotSeat: Aston Martin's Lawrence Stroll 6 Infrastructure week, meet infrastructure year 33 [rll be a mixed vintage for the wine world @ Golf's Asian Tour gets out of the rough oF Jane Bond? Legal shrooms? What are the odds? 65 50 COMPANIES TO WATCH BACK PAGE Jour 2021 scorecard 80 8 VaHY UVaA FHL ‘yoonssoupna BiequooiaCan central banks chart a course that safely takes us out ofthis bizarro world?& 8 z News flash: The coronavirus isn’t going to be public enemy No. 1 for the global economy in 2022. The biggest dangers this year will stem from inflation and the risk that policymakers will call the post-Covid recovery wrong. This is the year we'll find out whether the global economy is robust enough to get by with less help from governments and central banks. And whether inflation is a tempo: rary byproduct of Covid or a more persistent problem. When confronted with a wide range of possibilities, forecasters usu ally settle somewhere in the middle. ‘Among those Bloomberg surveyed, the consensus is that the world economy will expand 4.4% in 2022, after the 5.8% bounceback of 2021. From 2023 onward, most agree, growth will return to its longterm norm of around 3.5%, as if Covid never happened. ‘There’s just one problem. From ground level, nothing about this econ: omy looks normal; it’s completely out of whack, If that’s still true in 12 months, policymakers will almost certainly have messed up. ‘Take the labor market. There were at least 10 milion job vacancies across the U.S. at the end of 021, which every restaurant manager, plant foreman, and chief executive wil tell you they're struggling to fill. The labor shortage shows up everywhere—except in the sta tistics. Dig into the numbers, and you'll find at least 5 million adult Americans not working today who were gainfully employed at the start of 2020. ‘The US. isn’t the only country with workers missing in action. The U.K. had more than a million unfilled jobs in November but at least 600,000 more people sitting on the sidelines of the job market than at the start of 2020. ‘They are declining to take up work even as wages pick up. Whether it’s waiters or truck driv: ers, microchips or cream cheese, the mismatch between demand and sup- ply has become the leitmotif of the Covid recovery-the legacy of a crazy 18-month period that saw the world’s biggest economy shrink by almost 20% in six months then gain it all back by the middle of 2021. ‘The big winners from that historic bounce were U.S. households, whose wealth soared thanks to booming real estate and stock markers (that is, those that had wealth to begin with). Collectively, Americans had an esti- mated $2.6 trillion in extra savings sitting in their bank accounts as of mi year, a stash that equals 12% of gross domestic product. For much of 202, policymakers at the Federal Reserve and many other central banks felt confident dismissing the labor shortages and supply-chain bottlenecks as short-term conse- quences of the pandemic. Lingering fear of Covid and those extra federal dollars in bank accounts were discour- aging many of the unemployed from returning to work. Give it time, and these issues will get sorted out, the central banks reasoned. ‘That a good portion of the 2021 infla tion “surprise” was due to rising energy prices appeared to strengthen the case for central bank inaction, because higher fuel costs, on balance, tend to slow growth. But by Thanksgiving, US. consumer price inflation was run. ning at 6.8% a year, the highest since Ronald Reagan was president and about three times the Fed’s forecast at the start of 2021. So in December the narrative finally shifted from “It’s transitory” to “It’s taking so long to move on, it ‘may need a kick;” and markets are now betting the Fed will hike interest rates at least three times in 2022. The Bank of England, expecting inflation to go above 6% in the coming months, got a head start at its last policy meeting of 2021, raising interest rates by 25 basis points. Investors have penciled in another four increases in 2022. ‘The European Central Bank hasn’t raised its policy rate in more than a decade, and its pre dent, Christine Lagarde, has said an increase isn’t in the cards this year either. The 19-country euro zone is less inflation-prone than the U.K. and the U.S, to start with, plus its eco nomic recovery has been less robust. Nonetheless, with the latest data release showing that consumer prices increased ata record pace of 5% in the year through December, the ECB could also come under pressure to hike. So we know that the world’s most important central bank will be withdrawing support from the economy, and others may not be far behind. The course of 2022 will be shaped by whether that’s too much for the recovery to take or whether it’s too litle, too late. It used to be that central banks caused most recessions. To be on the “too much” side of the argument and worry about the Fed causing the next one, it helps to be pessimistic about the economic fallout from the omicron variant and also to fear the economic side effects of federal stimulus dollars drying up at the same time interest rates are rising, Bloomberg Economics expects that omicron will have a visible but short lived effect on growth. Each successive Index of personal expenditure on goods 42019 =100 7S. / canada UK. / ro 00 20 110 20 aszoal peak in infections has tended to have diminishing economic costs, in part because everyone has gotten better at handling the economic fallout. Omicron appears to be more contagious but less deadly than earlier variants. Spikes in infections could still weigh on economic activity in the short term by push- ing absenteeism sharply higher—as is already happening in the U.S. and UK. Yet in the longer term, omicron’s arrival could speed the transition from pan- demic to endemic, reducing the need for economically disruptive lockdowns. ‘The hit from governments ending support spending is harder to play down, because it’s simple arithme: tic. The U.S. economy had two years and a trillion dollars in federal stim- ulus, much of it in the form of cash handouts. Removing all of that inevi- tably punches a hole in total demand worth at least 3% of GDP, according > or20%7 8 VaHY UVaA FHL oonssousna BiequodtaJanuary 7,202 ‘THE YEAR AHEAD ‘Bloomberg Businessweek GDP growth forecast, year-over-year change ©2021 ©2022 0 4 inca? Phiopines Spain Indonesia aly Saud Arabia Malaysia China Euro ares Singapore Pakistan” rence: Germany us. uK Pers canada ‘Thailand South Korea Japan New Zaslond Colombia Argentina Nigeria Australia cite Mexico Turkey Russia Homa Kong, soutnatica] e Braai | © e ‘to Goldman Sachs Group Inc. chief political economist Alec Phillips. And that forecast assumes that the Biden administration manages to pass its $1.75 trillion Build Back Better plan, which is spread over to years and might add 0.5 percentage point to growth in 2022. All or most of that extra spend- ing could evaporate if the White House cannot cut a deal with West Virginia's Democratic Senator Joe Manchin, who's aholdout. Will this about-face for both fiscal and monetary policy kill the global recovery? Financial markets don’t seem tothinkso. Global equity markets were worth about $150 trillion at the end of 2021, having doubled in value since March 2020. The broad S&P 500 index Of US. stocks even managed to go up on the day the Fed announced it would be tapering off its bond purchases faster to clear the runway for rate liftoff. Bloomberg Economics expects the US. economy to grow at a 4.4% pace through the first half of 2022, despite the hit to spending and investment from ‘omicron and the withdrawal of federal stimulus, slowing to a still respectable 2.7% in the second half. One big reason: ‘The majority of American consumers still have money to spend-that extra $2.6 trillion sitting in bank accounts. ‘And, for once, that money isn’t concen: trated among the richest households, probably because an estimated two- thirds came from government handouts. ‘Anna Wong, chief U.S. economist at Bloomberg Economics, reckons that a family with income in the $24,000 to $75,000 range now has enough of a cushion to maintain pre-pandemic spending for at least another two ‘months without cutting into regular sav- ings. This group would typically have lit: tle or no financial wiggle room at all. Assume the U.S. economy can with- stand monetary tightening, What about the rest of the world? Shifts in the Fed's stance may spur a flight of money to the U.S. and away from riskier markets. Many emerging:market economies will face a difficult choice between raising rates themselves to stem outflows o keeping them low to sustain the domes- tic recovery. Ziad Daoud of Bloomberg Economics has identified five that are especially vulnerable to rising US. rates: Brazil, Egypt, Argentina, South Africa, and Turkey, or the Beasts. (Although President Recep Tayyip Erdogan’s unconventional approach to taming inflation, by cutting rates, arguably puts Turkey in a class ofits own.) Overall, emerging-market policy rates will probably go up, but Bloomberg Economics anticipates that these econo- mies, excluding China, will row 4.8% in 2022, That's almost 2 percentage points lower than in 2021, though it’s well above pre-Covid levels. ‘The biggest reason the world might be able to shrug off the impact of Fed tightening is that the ECB and the Bank of Japan are committed to keeping rates at rock bottom for the time being. So there’s still a lot of cheap money floating around the world in search of a home. This partly explains why long: term interest rates~as reflected in the yield on 10-year U.S. Treasury bonds— hhaven’t reacted very dramatically to the Fed’s plans to raise short-term rates. ‘Another is that the People’s Bank of China, for the first time in living memory, is going to be moving in exactly the opposite direction from the Fed. This is a big deal, the mone- tary analogue to China’s top diplomat, Yang Jiechi, telling U.S. Secretary of State Antony Blinken where he could put his lectures about human rights at their fractious first meeting in Alaska in March. By loosening policy to sup- port an economy struggling with the effects of a property market crack- down at the same time the Fed is tight- ening, the PBOC will be making its >Introducing ATEM Mini Pro The compact television studio that lets you create presentation videos and live streams! ining and Conferences ‘Simply connect HOMI cameras, computers or even microphones. ‘Then push the buttons onthe paneltoswitchvideo sources just ikea . y professional broadeacter! You can even ad ies, picture in picture iskor fash storage tothe Us ‘overlays and mi auch! Then ive tream to Zoom, Skype or YouTube! ing and Educational Videos ATEM Mini. US$295 ATEM Mini Pro. US$495 ATEM Mini Pro ISO. US$795 Learn more at www.blackmagicdesign.com BlackmagicdesJanuary 7,202 ‘THE YEAR AHEAD ‘Bloomberg Businessweek own declaration of independence from the US. For Europe the wild cards this year will be energy costs and politics. Gas and electricity prices are at record highs because of nuclear shutdowns in France and reduced supplies of Russian natural gas. Italian Prime Minister Mario Draghi has argued that govern: ments need to take action to protect consumers, but governments already carrying a lot of extra debt won't relish having to help out again. In France the energy crisis and a potential sixth wave of Covid will pro- vide the backdrop for a presidential election that, barring a last-minute upset, will likely see Emmanuel Macron hold on to power (page 8). Italy's future looks less certain follow- ing the surprise news in December that Draghi may seek the presidency, leaving the more hands-on job of prime minis ter to someone else. Voting begins on Jan. 24. Italy is still deemed the country most likely to cause the next European financial crisis, and none of Draghi’s likely successors have the stature of the former ECB president nor the con- fidence of other European leaders and international investors. In the U.K., after a string of politi cal scandals, many now expect Prime Minister Boris Johnson to be ousted in a party coup sometime in the first half of 2022. Mujtaba Rahman, manag- ing director for Europe at the Eurasia Group Ltd., a political-risk consulting company, puts a 40% probability on Johnson losing power by the end of the year. But with no parliamentary elec- tion on the horizon, a change of ieader- ship will possibly not have a big impact on the handling of the economy. Let's shift our attention back to j oad z ,heit geaté ieee’ the U.S., which for better or worse dominates any discussion about the tra- jectory of the global recovery, because itgenerates approximately one-quarter of world output. Investors are pricingin only three U.S. rate increases in 2022. Bloomberg Economics sees the Fed’s latest forecasts for the unemployment rate and core inflation as consistent with six hikes. But even that would barely take the main US. policy rate above 1% by yearend, well below inflation and below the pre-Covid level. With or without President Joe Biden’s Build Back Better spend- ing, it would be surpris- ing if those hikes were enough to stall an econ- ‘omy that entered the year ‘with significant momen- ‘um. The bigger question, then, isn’t whether Fed Chair Jerome Powell and company will have done too much by the end of the year but rather will they have done enough? “My fear is that we are already reaching a point a where it will be challeng- ing to reduce inflation without giving rise to recession,” said former US. Treasury Secretary Larry Summers in an interview in December. The economist and Bloomberg contributor a worried early and often in 2021 that President Biden’s $19 trillion Covid- relief package would stoke inflation without 50% eo ttey —enisera Mexico <0 risa <—$ ast nar I <0 south Atrica 0 cotonbia eux. <—e on ‘€e Pines — evs. doing much to increase underlying growth, His argument, that a third round of short-term stimulus wasn’t really needed, looks stronger now that wwe have household data suggesting U.S. families had collectively already made up all of the pandemic shortfall in wage income by the time the package was passed in the spring. Plenty of others have joined Summers in the peanut gallery taking shotsat the Fed, among them economist and Bloomberg columnist Mohamed ELErian, who rates the Fed's “transi: tory” line on inflation “probably the ‘worst inflation callin the history of the Federal Reserve.” ‘To believe it’s going to take more than a few interest-rate increases to ill inflation, it helps to have the view that supply side problems are only partly to blame for higher prices. Also, that workers in this out-of klter Covid economy suddenly have leverage to extract increasingly hefty wage rises from employers. U.S. hourly wages rose 5.8% in October from the previous year, the third-highest year-over-year ‘wage growth since the early 1980s. A broader measure of wages and bene- fits also logged its biggest one-quarter increase this century. It’s been more than four decades since the U.S. saw a wage-price spi- ral. For America’s hourly workers, pay has barely kept up with inflation since the 1980s, let alone helped fuel it, a trend underpinned by globalization, falling union membership, and rising automation. Even so, the sheer level of demand in the second half of 2021 should give pause to anyone who thinks US. inflation will go away overnight. ‘The consensus among the econo- mists Bloomberg regularly surveys is that the pandemic may have changed the way we work and shop in an endur- {ng way, but that the basic dynamics of demand and supply will revert to the norm fairly quickly once we neutralize the threat from the virus, Then infla- tion will start gravitating back toward the Fed's longterm goal of 2%. I'they’re right, policymakers will have managed tosteer the U.S. economy to a soft land- ing and avoid a recession. If they're ‘wrong, 2023 will be the year we all pay the price. —Stephanie Flandersae “Banking with Republic saves me a great deal of time. Wherever I am in the world, they take care of what I need.” DAVID HO, M.D, Vir University Irving Medical Center Y REPUBLIC BANK a privilege ou" CoO ee Re en on eee Pe)January 17,2022 ECONOMICS& POL THE YEAR AHEAD Bloomberg Businessweek Len} Armidterm surpi il Mideast realignments ul Budget cut blues 2 Covid zero costs China Warming to nuclear India needs investment jamaphosa Georgia on everyone's mind 18 Edited by Gristina Lindblad and Amanda Kolson Hurley It’s the Economy, Stupide ‘France's president has an ace up his sleeve as he seeks a second term For five years, Emmanuel Macron has been fending off challenges from the fringes of French politics. It began in the 2017 election runoff against far- right nationalist Marine Le Pen, continued through a showdown with the yellow vests protest move- ment, and is culminating in a culture-war clash with ultra-right-wing polemicist Eric Zemmour, who entered the race for the presidency in November. But as he seeks reelection in April, the president who was nurtured in the top echelons of the French technocracy has a potential knockout punch: the robust economy. With polls showing that the French are veering right, Macron regularly gives nods to that part of the electorate. He has praised former President Nicolas Sarkozy for inciting a debate on “national identity,” hired a hard-line interior minister, and gave an inter- view to a far-right publication in which he spoke about immigration and Islam. In turn, his star has faded among left-wing voters. But rather than becoming ensnared in confron- tations about identity and immigration, Macron’s most senior supporters are urging him to lean on his economic record. >Photograph by Joanna McClure SOLLITOd ® SOINONODA —zz02 1 Arenver VaHV NVA TEL ooussousna Biequ001aJanuary 17,2022 ECONOMICS & POLITICS ‘THE YEAR AHEAD ‘Bloomberg Businessweek After a precipitous crash early in the Covid-t9 pandemic, France has enjoyed a standout rebound, with out: put reaching pre-crisis levels in the fall-ahead of peers and sooner than even Macron’s team expected. Vast spending to support households and businesses during the lockdowns preserved the country’s economic foun dations, and Macron has built on them the high-speed deployment of a 100 billion ($113 billion) recovery plan. “at a time when crowing about France’s decline seems to be in fash: m, we have among the best economic ‘growth figures in the euro zone, and we got back to pre-crisis levels of activity three months sooner than expected,” Finance Minister Bruno Le Maire told Parliament at the start of December. Trends in the job market and corporate investment suggest that Macron’s contested labor and tax reforms from early in his tenure are finally delivering results. Despite media portrayals of a nation of dis- contents, one long-running survey indicates the French consider their living standards higher with Macron the Elysée Palace than under either of his two most recent predecessors. After taking office in 2017, Macron pushed changes through Parliament to make labor laws more flexible and used his first budget to pick apart France's Macron's favorability ‘a ‘apo + 17% 8 9/2014 a 37%| 11/2020) Macron plenty of numbers to bolster his credibility. His pro-business tlt has helped return company profit margins to levels not seen since before the global financial crisis. That’s no vote-winner in ‘country where corporate profits are at best viewed with suspicion, but he can point to a corresponding increase in investment rates, which have reached their highest level since the 1970s. The pandemic did little to disrupt the trend of companies putting more money bback into the economy-in fact, invest: ment levels in France are higher now than before the crisis, while Europe as whole still hasn’t recovered. Entrepreneurial spirits are running high, with the monthly count of new ‘companies continuing on a sharp up- ward curve that began in 2017 and was only briefly interrupted by Covid. Foreign investors are piling in, help. ing the country surpass the U.K. and Germany in consulting firm EY’s rank: heavy taxes on wealth and capital. Such record is up for debate. A recent report by the Institut des Politiques Publiques lent, including em during Covid, have boosted faw.a330: overall-particularly for working people-they segment of the population, Another report, from the government think tank no link between the changes in taxation and improvements in wages and invest overhauls remain on the to-do list, including the pension reform he paused Even ifit’s tricky to establish cause and effect, many indicators have ing for attracting projects that create smene ew facilites and jobs. a The labor market is stronger despite the 5° upheaval of lockdowns, O unemployment has dropped to levels seen just before the first wave of Covid, and the employment rate hit 67.5% its high- est level since record-keeping began nearly a half-century ago. The French Teader can also boast some success in raising the ratio of new hires on cov: eted open-ended contracts~a ticket in France to access housing and loans. Come April’s election, the eco: nomic stars may align for the incumbent president, with activ changes take time to bear fruit, and the found that while Macron’s poli disposable incomes 67. didn’t help the poorest Conseil d’Analyse Economique, found ment. And some of Macron’s planned uring the pandemic. improved in the last five years, giving ity still rebounding, billions of extra euros in consumers’ pockets, and “Macronomics” intact. That timing could be crucial, because the recent surge of the omicron variant has driven Covid cases to record numbers, put pressure on hospitals, and em- broiled Macron in a controversy over his use of vulgar slang directed at the unvaccinated. He'll also be counting on the longer-term economic argu- ment to offset more recent concerns about surging inflation, as well as pe- rennial doubts as to whether he came anywhere near achieving his aim to unite a country polarized by right-left divisions on issues ranging from reli- gion to security. IfMacron prevails, he'll be the first incumbent to win reelection in France since Jacques Chirac 20 years ago. With Olaf Scholz now chancellor in Germany and Mario Draghi leading Italy, that s the prospect of Europe’s three largest economies being run by closely aligned champions of closer EU inte- gration who are eager to project the bloc’s economic heft. Should he be defeated by Le Pen, the political landscape in Europe will look significantly different. While she has dropped her opposition to the euro, her National Rally party remains staunchly opposed to any federal shift in the EU and wants to put the brakes on free circulation and trade within the bloc. Valérie Pécresse, a center-right candidate who's risen in the polls in recent weeks, would provide more continuity, promising pro-business pol icies similar to Macron's. ‘Whatever the result of the coming election, the winner will potentially benefit from an economic base some have compared to that left to Angela Merkel by reformist German Chancellor Gerhard Schriider. Holger Schmieding, the chief economist of Berenberg, in 2017 posited a “golden decade” ahead for France. He says his thesis still holds. “The rebound of France is one of the most interesting longer-term stories, and it is a key factor in stabi lizing the core of Europe for good,” he says. “The return to a balance between Germany and France has huge pol cal ramifications beyond the numbers.” —William Horobin, Ania Nussbaum, ‘and Caroline Alexander .How the Could Keep The House ‘The party is widely expected to lose seats, but Republican self'sabotage could give itan assist ‘The most common prediction among political pundits for 2022 is that Democrats will lose control of the House of Representatives in November. ‘The reasons are almost too numerous to list: Inflation is up; voters’ perception of the economy is down; Covid-tg lin: gers; President Joe Biden is unpopular; and by a 2-to-t margin, Americans say the country is on the wrong track. In addition, the president's party almost always loses seats in midterm elections. ‘These powerful headwinds have both parties believing that House Democrats are most likely doomed. But conventional wisdom sometimes turns out to be wrong. What woul take for Democrats to defy expecta tions in the fall? Although no one is predicting such an outcome, political handicappers and strategists in both parties can envision plenty of scenarios for how Democrats might pull a rabbit out of their hat. Any upset would be predicated on one thing: a return to normalcy. Insiders agree that inflation would have to fall and Covid subside to the point where schools stay open and masks are an afterthought. “It needs to feel like 2019, not 2021,” says Liam Donovan, a Republican strategist. Since midterm performance is closely tied to the president's approval rating, Biden would also have to lift himself out of his slump in the low 40s-particularly with independent voters. Gallup polls show his approval dropped sharply among independents from February to September, then ticked up slightly to 40% in December. Independents, unlike hardened parti sans, are apt to change their minds response to changing conditions. Indeed, even as polls show broad Aissatisfaction, there are hints that bet- ter days may lie ahead. A November YouGov poll found that 74% of Americans said their lives had returned to “normal” almost two years into the Covid pandemic. Ifomicron and future variants don't plunge the U.S. back to the dark days of 2020, Democrats think more people will come to share that feeling and vote accordingly. Biden’s revival is a precondition for any Democratic recovery. But it prob ably isn’t sufficient for the party to hold the House. Democrats will also have to turn out in historic numbers, something they rarely do in midterm elections. The good news, says AFL: ClO strategist Mike Podhorzer, is that the surge in Democratic votes during the Trump era was so large that the party doesn’t have to rely on persuad- ing Republicans to defect. “The Democrats way out ofthis isto get people who didn't show up to vote for Hillary, but did vote for Biden, to show up in November,” says Podhorzer. “Biden won 81 million votes.” But those Biden voters would first need to be motivated. Polls show they're not. What could change that? ‘One possible answer is the U.S. Supreme Court overturning Roe v. Wade in June. “It could be absolutely game-changing in two ways,” says Democratic pollster Celinda Lake, “By energizing women under 40, who aren’t paying a lot of attention to poli tics, And by firing up women over 50, who are the key swing bloc in politics right now. They remember when Roe ‘was new or nonexistent, and some of the older ones had the experience of taking someone to Canada or Mexico for an illegal abortion.” For all the heated debates over messaging, most experts suspect Democrats can’t control their own destiny. “When parties defy the midterm curse, it’s usually because the other party did something to self-sabotage,” says David Wasserman of the non: partisan Cook Political Report. “That's what happened when Republicans impeached Bill Clinton in’98.” When it comes to Republicans inflicting damage on their own party, all eyes turn to one man: former President Donald Trump. His score- settling with members of his own party after his loss to Biden probably cost Republicans control of the Senate. ‘As much as Democrats might loathe the prospect of his return, Trump could plausibly short-circuit historical vot- ing patterns by sowing discord within his party and sabotaging Republican voter enthusiasm. To defy predictions, Democrats probably need him to be a high-profile negative factor in the ‘months leading up to the election. Donovan has a theory about how that might occur. “For the last year, ‘Trump has been ina straitjacket where he can’t harm his own party,” he says. “With Jack Dorsey [the former Twitter Inc. chief executive officer] leaving, maybe he gets back on Twitter.” ‘That would vault ‘Trump back into the public spotlight. And then, who knows? Says Donovan, “There's no big- ger midterm wild card than letting the tiger out of its cage.” —Joshua Green ml A Big Thaw In the Middle East}? Regional rivalries cool down, giving some states more latitude and leverage In a part of the world where stability and predictability are elusive, 2021 ended much the way it started: with surprise reconciliations among regional rivals and the prospect of more. In January 2021, Saudi Crown Prince Mohammed bin Salman invited > 8 SOLLITOd ® SOINONODA. VaHY UVaA FHL oonssousna BiequodtaJanuary 17,2022 ECONOMICS & POLITICS ‘THE YEAR AHEAD ‘Bloomberg Businessweek 4 Sheikh Tamim bin Hamad Al Thani, the Qatari emir, to a Gulf summit, where they signed an agreement end- ing the three-year-plus boycott of Qatar that the kingdom had led ‘Ten months later, United Arab Emirates Foreign Minister Sheikh Abdullah bin Zayed Al Nahyan met in Syria with Syrian President Bashar al-Assad, who was until recently a pariah in most of the Arab world. Syria had been suspended from the Arab League in 2011 because of the Assad regime's violent crack- down on a popular uprising, a conflict that later escalated into a civil war. The UAE-Syria meeting in November signaled the possi tion of Syria’s regional ties at the upcoming Arab League summit, to take place in Algeria in March. Also in November the UAE's de facto ruler, Sheikh Mohammed bin Zayed Al Nahyan, paid a visit to Turkey, launch ing a $10 billion fund to invest in the country and ending a decade of strained relations. Asimilar thaw between Turkey and Egypt-which had scaled back their ties about nine years ago-could hap- pen in 2022, And there are signs of a rapprochement between Turkey and Saudi Arabia, with Turkish President Recep Tayyip Erdogan set to visit the kingdom in February, although differ: ences remain. Sanctions on fran may lft if nuclear talks progress, though they remain in a constant state of near collapse. Iran has had rounds of talks with Saudi Arabia in Iraq, and Iranian President Ebrahim Raisi has been invited to the UAE, a visit that’s expected to mark a turning point in relations between the countries. Any tightening of links between mostly Shiite Iran and the Sunni-majority Gulf states, including the UAE and Saudi Arabia, could ease regional sectarian conflicts. ‘Two main factors appear to be influencing the change in the landscape. ‘The firstis that the US. has been grad ually disengaging from the Middle East 2s policy appears to give the Saud) of a normaliza- Saxton Pre a ‘Motiamied bin Salman for more thana decade. That's left more room for regional leaders to maneuver and look for other ways to ensure their security. However, with freer rein also comes more risk: “If the Americans withdraw further, then that’s a further vacuum, and those leaders may not be so sure what fills that void,” says H.A. Hellyer, a scholar at the Carnegie Another factor is the end of the Arab Spring era, which strained tries took different sides in the conflicts between governments and demonstra- “will be moving from sof decreasing tensions to building bridges, focused on common inter- ests,” according to Ayham Kamel, head of the Middle East and North Africa at political risk consultant Eurasia Group. Regional leaders still remain fear ful of another wave of popular unrest, Kamel says, and that has led to ris. ing repression. Egypt is experiencing its worst human-rights crisis in many decades, according to Human Rights Watch, and there are fears that Tunisia, ‘which had managed to establish a func- tioning democracy, is regressing into authoritarianism after the president in July seized additional powers and shut: tered parliament. Karen Young, a senior fellow at the Middle East Institute in Washington, says the winners from the shift are mainly Gulf countries. “There’s more of a potential now for a whole lot of bilateral moves and dealmaking,” she says, “but a lot of the leverage is in the hands of afew.” A look at the map confirms that. ‘There are no signs of an end to the almost eight-year-long war in Yemen. In Syria, fighting has subsided, and Assad has recovered large portions of the country, but the road map to peace remains in question. And Lebanon enters another year on the brink, with no recovery in sight from its economic collapse and the crash of its currency. —Donna Abu-Nasr Ml Washin Where Budget \ Cuts Threaten Growth ‘The pivot away from pandemic stimulus will hurt more in some places ‘The world economy bounced back from the Covid-19 slump faster than most forecasters reckoned was pos- sible a year ago-thanks largely to record injections of government money. Now those aid programs are getting trimmed or wound down. ‘What that means for global growth is one of the key questions for 2022. Financial markets are fixated on how fast central banks will raise interest rates to counter surging inflation, But how governments adjust their bud- gets will likely have a bigger impact on economies than anything monetary authorities do, at least in the devel: oped world. Belt-tightening is under way at various speeds in different parts of the world, and much of itis provisional. The omicron variant could yet upend governments’ plans. In the USS., President Joe Biden’s proposals to ramp up spending on child care and clean energy have hit a wall in Congress, though they're not dead yet. Offsetting that is the prospect of more stimulus in Japan and China~and perhaps in Europe, where Germany's new government is keen to make green investments. Here’s a roundup of where fiscal pol- icy is headed in some of the world’s biggest economies. After the biggest stimulus program in history, budget policy swung from being a support for growth to becom: ing a drag in the second quarter of last year, according to the Brookings Institution’s gauge of fiscal impact. Biden has been pushing a spend- ing bill worth $1.75 trillion over a decade, with the biggest dollop com- ing this year. It includes an extension of the child tax credit and support i gMlustration by Angela Stempel for clean power and electric vehicles. ‘The president has been unable to win backing from West Virginia Democratic Senator Joe Manchin, whose vote is needed to pass the mea sure, so it’s on hold for now. If the so-called Build Back Better legislation collapses, it would likely shave about 0.75 percentage point off 2022 growth, according to Moody's Analytics, which currently forecasts 4 4% expansion. Passing a Manchin- approved version of the bill could add 0.5% to growth, Moody’s says. Meanwhile, Biden has acted to pro- Jong one kind of stimulus that doesn’t require a Senate vote: extending a freeze on student debt repayments until May. CHINA Relatively restrained early in 2021, when the economy was rebounding strongly, China changed course when growth started to flag later in the year. Beijing began prodding local govern: ‘ments to borrow and spend faster. It also extended some personal income tax breaks as part of an effort to stimulate consumer spending. Expect ‘more supportive measures in 2022, as officials endeavor to keep growth from sinking below 5%. ef ee Negotiations over how to get back to fiscal normality have revived tensions between a “sound finance” camp traditionally led by Germany-and those more concerned with avoiding a repeat of last decade's austerity-driven slump. ‘That clash won't be resolved quickly, because the debt and deficit restrictions lifted during the pandemic will remain suspended throughout 2022, France, which takes over the European Union’s rotating presidency for the first six months of 2022, has jade investment and pro-growth pol- jes the top priority. Germany's new finance minister, Christian Lindner, hhas a reputation as a fiscal hawk and has repeatedly warned of the need to censure “monetary stability” in the euro area. Yet ona visit to Parisin December, he remarked that Germany and France “don’t always share the same ideas,” but havea knack for consensus in the end. JAPAN Prime Minister Fumio Kishida— who faces national elections in the summer-unveiled a spending package in November that includes cash pay: ‘ments for families with children, wage increases for low-paid caregivers, and a revival of subsidies for domestic travel (currently on hold as the dan: ger of omicron is assessed). With an initial price tag of 56 tril- lion yen ($480 billion), equal to 10% of gross domestic product, the pack- age was much larger in scale than expected, even if some of the mea- sures are effectively re-ups of existing programs, Together, they will limit the drag on growth from the phaseout of other pandemic relief. Chancellor of the Exchequer Rishi Sunak is redefining what it means to be a Conservative in Britain. In 2021, he raised taxes by more than any > ; VaHV UVaA FHL ooussousna Biequ0d.aJanuary 17,2022 ECONOMICS & POLITICS ‘THE YEAR AHEAD ‘Bloomberg Businessweek Diminishing Returns From Covid ‘The economic costs of Ghina’s virus containment policies are mounting In 2021, China managed to stamp out scattered Covid outbreaks while still delivering annual economic growth in the neighborhood of 8%. It helped that, even as the country kept its borders more or less sealed, foreign direct invest- ‘ment and portfolio capital kept rushing in, while exports continued to flow out. Yet as Goldman Sachs noted in a Jan. 5 report, the economic costs of Beijing's Covid-zero stance “appear to be increasing over time as each new variant is more ‘transmissible than the previous ones.” Omicron is a threat of a different magnitude, even for a population that’s 87% vaccinated, because the China-made shots appear to provide inadequate protect Bs mn against it. Expect more cit Jockdowns like the one instituted in Xi'an, a metropolis , of 13 million residents. These wreak havoc on local businesses sumers. Industrial production and retail sales, which had been. depressed as a result. Goldman Sachs reckons that in an extreme growth could phinge to 1.5%, the lowest recorded since 1976. and can snarl up supply chains. They also spook con- flagging toward the tail end of last year, may be further scenario where a national lockdown is decreed, annual —Gristina Lindblad and james Mayger Frzote New confirmed Covid cases, weekly Scheduled seats on international flights, weekly Exports Inbound foreign direct investment Inbound portfolio investment Equities = Bonds Economic activity, year-over-year change 30% , 15 7 Retailstes et a 15 / ndstit output x: { UK. finance minister in almost three decades, amounting to a £46 billion ($62 billion) charge-about 2% of GDP on households and companies. This was intended to fund extra spending on health care and austerity-ravaged public services without adding to debt racked up during the pandemic. Sunak, who's said it would be “immoral” to increase borrowing, is on track to get the national debt on a declining path by the middle of the decade. But his boss could throw him off course. With coronavirus raging once again, energy bills soaring, and interest rates set to tise, Prime Minister Boris Johnson is under mounting pres sure to postpone a planned £12 billion payroll tax increase in April. EMERGING MARKETS _ Brazil, which had the most generous pandemic stimulus among emerging economies, pared back much of it last year. But President Jair Bolsonaro, ‘who is campaigning for reelection this year, is again increasing cash trans: fers to the poorest households. Doing so required changes to a government spending cap in place since 2016-and that helped weaken the currency and drive interest rates higher amid con- cerns about increased inflation, which is running above 10%. Mexico kept a tight grip on spending. There were some signs of loosening in September's budget pro posal for 2022, which foresees a deficit of 3.1% of GDP, compared with 2.4% in a preliminary version, Stil, President Andrés Manuel Lopez Obrador says he won't increase the national debt, and his administration recently announced a fresh round of cuts at government agencies, including mothballing the nation’s climate institute, In Asia, Thailand and Malaysia have raised debt ceilings to accommo: date more spending, while Vietnam is considering a new support package worth about 4% of economic output. Indonesia, meanwhile, has pared back its budget and raised taxes as itaims to bring its deficit back under 3% of GDP by 2023. —Ben Holland, Chris Anstey, Andrew Atkinson, William Horobin, James Mayger, Maria Eloisa Capurro, Claire Jiao, and Yuko Takeo . Countries are warming to the idea of building new reactors ‘The green energy transition is hitting some speed bumps, as power short: falls in Asia and Europe boost global demand for fossil fuels. That’s expos- ing the pitfalls of relying too much on fickle wind and solar—and focusing ‘more attention on nuclear energy. Although efforts to battle climate change have been largely dominated by renewables, the International Energy Agency says achieving net-zero greenhouse gas emissions by 2050 will require doubling nuclear power ‘worldwide. Itaccounted for just 4% of primary energy consumption in 2020, according to BP Ple’s Statistical Review of World Energy. “Nuclear needs to be part of the broader conversation,” says Joseph Majkut, director of the energy security and climate change program at the Genter for Strategic & International Studies in Washington, D.C. “We'll need to build quite a lot to get there.” ‘The US. is at the forefront of efforts to design smaller nuclear syste ‘These so-called SMRs~small modular reactors~are expected to be faster, eas- ier, and cheaper to build than the mas- sive conventional nuclear plants that are common now. TerraPower LLC, ‘which has secured $80 million in fund- ing from the U.S. Department of Energy to develop its technology, is planning to install a new type of reactor at a ‘Wyoming coal-fired power plant that’s scheduled to close in 2025. ‘The Bill Gates-backed company says the system could be operational as soon as 2028 and has a projected cost of $4 billion, Contrast that with the $29 billion price tag of the two reac- tors being added to the 1980s vintage Vogtle nuclear power plant in Georgia, a project that has been plagued by delays and massive cost overruns. NuScale Power LLC expects to complete an SMR plant in Idaho by 2029. The goal is to fabricate the key components at a factory and ship them to the project site to be assem- bled. The company is also chasing opportunities abroad, including in Romania, where it may be able to build a plant even sooner, by 2028. European countries have announced some of the world’s most ambitious climate goals, which is why many are looking to add more emission-free nuclear power. Skyrocketing electricity and concern that the European Union relies too much on Russian nat- ural gas are aiding the case for nuclear. There’s a market realignment under way on the continent, with for: ‘mer Soviet republics looking for alter: natives to Russian-made reactors. Poland, the EU’s most coal-dependent nation, is working with NuScale and talking to Electricité de France SA (EDF) about supplying multiple con- ventional nuclear plants. France already gets about 70% of its power from nuclear, more than any other country. The governments fund {ng efforts by EDF to develop SMR tech nologies and also considering building ‘more big facilites, in part because some of its reactors are nearing the end of their life spans. Germany, where aver- sion to nuclear power helped birth a national political party, is bucking the trend: It’ set to decommission its three remaining reactors this year and has no plans to build new ones. ‘No country is plowing more money into new nuclear plants than China, whose fleet is on track to surpass that of the US., the world’s largest, by the middle of this decade. The country plans to build at least 150 reactors over the next 15 years at a cost of as much as $440 billion. China is also pus! to export its expertise to developing nations, including Pakistan, > 8 SOLLITOd ® SOINONODA. VaHY UVaA FHL oonssousna BiequodtaJanuary 17,2022 ECONOMICS & POLITICS ‘THE YEAR AHEAD ‘Bloomberg Businessweek Other Asian countries are being more cautious. Japan is evaluating SMRs but has been wary of restart: ing any of its reactors since the 2011 Fukushima disaster. Its most recent national energy plan sets a goal of getting 20% to 22% of its power from nuclear by fiscal 2030, up from about 5% in 2020, but doesn’t spell out , whether new plants would get built. ? Edwin Lyman, director of nuclear ‘©! power safety for the Union of Marlow Concerned Scientists, says that while the world needs more carbon: free electricity, nuclear reactors need to make economic sense to earn a big: ger share of the global power mix. Hefty government subsidies may not be a sustainable strategy for building and operating power plants. “Nuclear has a huge disadvantage,” Lyman says. ‘It’s expensive” —Will Wade, Jonathan Tirone, and Shoko Oda . MIA in INDI —Corporate Investment Companies are standing on the sidelines, which could jeopardize the recovery India has bounced back strongly from the pandemic and stands poised to claim the mantle of fastest-growing economy in 2021 and probably 2022 as well. The government's latest pro- jections are for a 9.2% expansion in the fiscal year that ends in March. Forecasts from the International Monetary Fund have growth dipping to 8.5% the following year, but even at that slower pace, India is expected to outshine all major economies. While the headline numbers are impressive, they conceal a troubling trend: Gross fixed capital formation, a ‘measure that encompasses investment least lead trol in physical assets from plants and equipment to bridges and roads, amounts to less than one-third of gross domestic product, according to World Bank data. In China, it’s more than 40%. Reserve Bank of India Governor Shaktikanta Das remarked in early December that private investment “is still lagging:” which could jeopardize the improvement in aggregate demand, ‘There's a broad consensus among ‘economists that India needs to boost that number to ensure a sustain: able recovery. The government is winding down its pandemic stimulus, motivated in part by the risk of having India’s sovereign debt rating down- Braded to junk. And while the central bank kept interest rates low ‘even as inflation ticked higher in 2021, economists surveyed by Bloomberg are predicting 60 basis points of hikes in this calendar year. Pent-up demand from house holds that were forced to retrench during two waves of Covid-19 infec jons will help underpin growth, but itwill fade as the year wears on. “The two drivers that were there in the pre-Covid period-private consump- tion and government spending—will not be growing at the same pace,” says Nikhil Gupta, chief economist at Motilal Oswal Financial Services Ltd. “So the only possible driver is private investment, which has yet to show strong pickup.” Investment had been trending down for about a decade going into the pandemic, despite efforts by Prime Minister Narendra Mod's government to revive it, including Make in India, a program launched in 2014 to encourage ‘ndanPrine companies to set up Mnieamoai factories, Yet for many would-be investors, labor and land rights issues that hamper such projects overwhelmed the incentives. ‘An initiative unveiled in 2019 that earmarked $1.9 billion for infrastructure projects via public private partnerships ‘was also supposed to goose investment. ‘Then the pandemic struck. Undeterred, the government rolled out a new program in 2020 that offers cash payments to companies meeting production targets in industries such as electronics, pharmaceuticals, and auto components. If companies needed any further incentive, India's Reserve Bank cut the benchmark interest rate to a record low of 4% at the start of the pan- demic, where itstill remains. So why are businesses reluctant to invest? Among the possible explanations is that demand remains fragile across many sectors, plus uncertainty about the impact ofa new wave of infections. Yuvika Singhal, an economist with Quanto Research in New Delhi, calls ita chicken-and-egg situation: “From a macroeconomic standpoint, only ‘when the consumption recovery looks durable are we likely to see the invest- ment cycle turn decisively.” she says. ‘There are signs the pandemic may have given rise to a two-speed econ- omy. While formal employment is picking up, rural India’s vast informal economy continues to struggle, with demand still high for government assistance and jobs available through an employment guarantee program. Ifabout two-thirds of the population doesn’t have the means to purchase items such as biscuits, shampoos, and two-wheelers, many companies could remain reluctant to inves “Sustainability will remain the key challenge,” says Kunal Kundu, an economist with Société Générale GSC Pvt. “While the most pro- nounced K-shaped recoveries ever and the concomitant rising inequal: ity helped drive consumption in cer- tain segments, aggregate demand is likely to remain muted-especially in comparison to the level seen two years ago.” —Vrishti Beniwal and Malavika Kaur Makol .deregulation of the power industry to encourage private investment and to end years of intermittent black- outs as well as auctioning the spec- CYRIL RAMAPHOSA trum telecommunications companies need to expand and modernize. He South Africa’s president can't afford to keep delaying reforms | Must also reorganize the moribund municipal governments that are cost- When South Africa’s Cyril Ramaphosa | ing his party votes, kick-start an infra- ascended to the presidency in| structure drive, and ignite growth—all February 2018, he spoke of a new | in the shadow of a pandemic that’s dawn. The nine-year reign of his pre- | decimated Africa’s most industrialized decessor, Jacob Zuma, had seen tens | economy and driven unemployment of billions of dollars looted from state | to a record 35%. companies. Under the new president | Above all, Ramaphosa must curtail the rand appreciated and business | the corruption that’s made graft syn- confidence surged in a bout of mar- | onymous with the South African state. ket enthusiasm the media dubbed ! He’s got little to show for his efforts so Ramaphoria, which quickly fiz- far. Although he replaced the zled. This year offers leadership of corrupt and Ramaphosa the chance to mismanaged state compa- start living up to the hype. nies, they remain dysfunc- With his main rival tional. And while he installed sidelined by corruption a former legal adviser from charges, Ramaphosa the International Criminal has a firmer hold on Court as head of the National power for the leadership Prosecuting Authority, the of the ruling African country has yet to see a National Congress. That single major conviction of a leaves the former labor union politically connected figure. leader and multimillionaire business- | If the president manages to make man poised to clinch a second and | headway on this long to-do list, final five-year term at December’s | South Africa may see a recurrence of party conference. Ramaphoria. And the ANC, in power Now that the threat of an intraparty | since the end of apartheid, could be challenge has been largely removed, | saved from the ignominy of seeing its Ramaphosa may finally be able to | share of the vote fall below 50% for the enact the economic reforms he prom- | first time, in national elections sched- ised. Those include completing the | uled for 2024. —Antony Sguazzin VaHY UVaA FHL ‘yoonssoupna BiequooiaJanuary 17,2022 ECONOMICS & POLITICS ‘THE YEAR AHEAD ‘Bloomberg Businessweek Photograph by Joanna McClure Georgia On Our Minds, Again ‘The Southern state will be the stage for ‘more high-stakes political drama ‘The swing state of Georgia became the crux of American politics in the 2020 election cycle. Not only did Georgians choose a Democrat for president for the first time in decades, helping Joe Biden clinch a victory, but they also elected two Democrats to the U.S. Senate in January 2021, giving the party razor-thin control of that chamber. Expect the spotlight to return to the state in 2022. One ofits Senate seats is again up for grabs. After becoming the first Black senator in Georgia history— ‘winning only a partial term in office in a special election-Raphael Warnock will vie for a full term in November. His likely challenger is University of Georgia and pro football legend Herschel Walker, who's backed by for mer President Donald Trump. Walker is also Black and, until recently, was a resident of Texas. ‘Then there’s the high-drama gov- ernor’s race. On the ballot: Stacey Abrams, the organizing powerhouse credited with turning Georgia blue in 2020 and a national lightning rod for Republican rage; Brian Kemp, the sit- ting GOP governor who beat her in 2018; and David Perdue, who lost his seat in the Senate to then-33-year-old Jon Ossoff in January 2021 and is now challenging Kemp in the primary. ‘Trump is pushing Perdue’s extraor- dinary move as payback for Kemp declining the defeated president's demands to overturn his electoral loss in Georgia. Perdue has already said he wouldn't have certified Biden’s win as required by law. The former sen- ator, once a Kemp family friend and supporter, even introduced him as Georgia's next governor at the state GOP convention in June. “This is going to be the marquee race in the country about Trump's influence in the Republican Party,” says Jessica Taylor, who follows gov- ernors’ races for the Cook Political Report. “This establishes the litmus test everywhere, which is, ‘Do you think the election was stolen?’” Republican consultant Brian Robinson says Perdue’s pitch is that “a significant minority of Republicans have lost faith in Kemp and will not show up to vote,” which would tip the race to Abrams. Kemp’s counter- argument, in Robinson’s words: “I’m the only person in the race who has ever beat Abrams, and you [Perdue] couldn't even beat Jon Ossof.” Nor is Kemp the only Georgia Republican suffering the wrath of ‘Trump and his supporters. His back- ers are trying to defeat Secretary of State Brad Raffensperger, the top elec- tions official, who debunked Trump's voter-fraud claims and refused to overturn the 2020 results. Lieutenant Governor Geoff Duncan, who pub- licly denounced the stolen-election narrative, has decided not to seck reelection. Duncan says Perdue’s run is a mistake: “There is no math that makes it easier to beat Stacey Abrams by having David Perdue in the race.” Georgia—once a bastion of racial segregation but now a powerhouse of Black business and politics—will also test whether Democrats can overcome Republican moves to limit voting to tilt elections in their favor. Stung by 2020's losses, exurban and suburban Republicans changed governmental structures, clamped down on mea- sures meant to make voting easier, and drew new congressional boundaries to dilute the growing Democratic major- ity in Atlanta's outskirts. How much these maneuvers will bolster the GOP in the rapidly changing state remains tobeseen. —Margaret NewkirkFind More Investment Opportunities Worldwide with GlobalAnalyst Find new opportunities to diversify your portfolio and discover undervalued companies that may have greater growth potential. GlobalAnalyst lets you compare the relative value of global stocks by region, country, industry or individually. Learn more and try GlobalAnalyst é InteractiveBrokers Member NYSE: FINRA, SIPC ~The projection oces information generated by Interactive Boker! Globalinalys tol regarding the Ikenood of various investment outcomes are hypothetical in natute, do not reflect actual investment results and (uarantoss offre resuts Plosse not ta esate ay vary wn oo fo tol ove ine; MPOBTANT. Corporal data & Provided by thirc-paries, and Interactive Brokers makes no warrantee as fo tye aceuracy of that data. You should Go your own due {ligence prior fo relying on any such data displayed in GlobalAnalyst. Sieieoceiensanuary 17,2022 CONSUMER THE YEAR AHEAD Bloomberg Businessweek About to Get Nasty ‘The auto giants held off while Tesla took the lead in the plug-in car market. ‘They won't with their most profitable vehicles In the summer of 2019, General Motors Co. President Mark Reuss teased out the idea that the company’s first electric pickup wouldn’t necessarily be designed for the job site but would be something with “more style and capability for off-road.” The implication then was that electric trucks, with their high cost and heavy batteries, weren’t quite ready for work duty. True to Reuss’s word, GM’s first plug-in pickup was the $110,000 Hummer EV, a high-end ride that went into production in November. On Jan. 5, GM Chief Executive Officer Mary Barra told the world a different story. The new Silverado she showed off virtually at the CES 2022 electron- ics show will start selling in the spring of next year, beginning with a $39,000 work truck ver- se sion that’s ready for towing and hauling. s=o's Amore expensive version aimed at week. 7 — end trail riders and suburban cowboys will hit showrooms in the fall of 2023. Why the turnabout? Batteries have gotten cheaper and better, for one, which means it’s easier to sell plug-in pick- ups such as a Silverado or Ford Motor Co.’ Fur tries to be animat-friendly rimer’s drug Aduhelm 23 us flight plan sky times for Macau casinos 26 Aspirited pandemic 7 Edited by James B. Elisand Ford researchers they're ready to plug in. Battery power has cap tured the imagination of retail buy- ers, and commercial customers are increasingly lured by the lower cost of operation and environmental, social, and governance benefits of adding zeroremissions trucks to their fleets, says Steve Majoros, Chevrolet’s mar: keting director Majoros, citing GM's consumer research, says pickup truck buyers show the fastest increase of any seg- ment in considering an electric vehicle for their next purchase. The Silverado announcement generated lots of inter est, and the $105,000 fully loaded version of the Chevy sold out in just 12 minutes, he says. Ford has said that almost 200,000 customers put down $100 to reserve the electric F-150 Lightning pickup, set to go on sale this spring. Demand is so strong that the company says it will nearly double planned production, to 150,000 a year. GMis hinting that it may need more production capacity for the electrified Silverado than it has at Factory Zero, its EV plant in Detroit, which also builds the electric Hummer pickup, and will churn out a battery-powered Hummer SUY; the Cadillac Escalade; Chevy and GMC pickups; and the Origin driverless shuttle. “Silverado is a priority of the company, and Silverado EV will be a priority for the company,” Majoros says. “Knowing e kinds of volumes that we, pect and knowing what's Factory Zero is the beginning.” ‘GM and Ford, which every year vie for the lead in full-size pickup sales, expect competition in the form of an electric Ram from Stellantis NV (for: merly Fiat Chrysler Automobiles) plus a growing convoy of newcom. ers. Tesla Inc. is preparing to build its Cybertruck, and startup Rivian Automotive Inc. began production of its $67,500 RiT pickup in October. Ford started manufacturing the Lightning before the electric Silverado, soit has a head start, but the GM truck ‘can go 400 miles on a charge, vs. the Lightning’s 300 miles, an issue for buy- ers with range anxiety. The Cybertruck is promising up to 500 miles, which could give it an edge since trucks lose range when hauling and towing, Still, the huge base of pickup own cers already driving Chevys, Fords, or Rams could help the established truck makers in the battle against Tesla and other upstarts. Analysts see growth, but less than what the automakers expect. Jeff Schuster, LMC Automotive’s president of Americas operations and global vehicle forecasting, predicts sales of 125,000 electric pickups next year. Ford alone cou be building more than that. 2024, with 40% of them being ‘Tesla Cybertrucks. That means Ford, Rivian, and GM-which will be selling the elec- trified Hummer, Silverado, and GMC Sierra by then-would be fighting for the rest. “There’s a lot of production being built up,” says Sam Fiorani, vice pres- ident for global vehicle forecasting at ‘AutoForecasting Solutions. “The prob- lem is we don't know how deep this pool is. When you start building tens of thousands or hundreds of thousands, then you learn how many people are willing to pay” —David Welch = Hollywood|is eading Back To Theaters Diminished results from opening films simultaneously online-and Spider- ‘Mant’s big bax office~are behind the bet Fans of action director Michael Bay's movies will be able to get their fix in April, when Universal Pictures releases Ambulance, a bank-heist thriller with plenty of police helicopter chases, small-arms fire, and explosions. The film is slated to make its debut exclu- juels in theaters-a strategy many studios had eschewed during the pan ‘demic. Yet even with omicron raging, Hollywood is tiptoeing back toward normal in 2022. “Theaters have weathered many, ‘many storms throughout history,” says Bradley Fischer, one of Ambulance’s producers. The extinction of cine- ‘mas, he adds, “has been predicted and proven false again and again.” Still, studios are hedging their bets. Many films getting a theatrical release this year, including Ambulance, will appear on streaming services about 45 days later. That’s a big change from the good old days of 2019, when it could take three months or ‘more before studios made movies available for home viewing. After almost two years of shut- downs, capacity restrictions, > 8 Z VaHY UVaA FHL oonssousna Biequodtasenuary 1 CONSUMER THE YEAR AHEAD Bloomberg Businessweek film postponements, and the simultaneous release of some pictures in cinemas and online, the industry is coalescing around a different strat egy: Films released in theaters will get jorter exclusive runs before moving to subscription services such as Disneys, HBO Max, Paramounts, and Peacock. This year will be a big test for this model, with cinemas learning whether they can generate enough traffic during those initial exclusive periods to have a profitable business and movie studios finding out if they can maximize reve nue from online and theatrical outlets. Hollywood is planning a big come- back in 2022, with a calendar loaded with potential blockbusters—including Avatar 2, the latest jurassic World install ment, and the long-delayed Top Gun sequel featuring megastar Tom Cruise, who's also expected to draw moviegoers with his return in Mission: Impossible 7. ‘There'll be superheroes, too, including former teen vampire Robert Pattinson in his first turn as the Caped Crusader in The Batman, slated for March. But with Americans now conditioned to watching first-run films at home, counting on moviegoers to buy tick- ets is hardly a sure thing. Then again, Sony Group’s Spider-Man: No Way Home has delivered a $1.5 billion-plus, theaters-only bonanza since despite the omicron surge. “Consumer habits have been impacted,” says Jeff Goldstein, head of domestic distribution at AT&T Inc’s Warner Bros. Pictures. “We see from this holiday period that there's no ques: tion that the avids have returned, but the more casual moviegoers have been much slower to return.” After releasing all ofits films last year ‘on HBO Max on the same day they hit theaters in the U.S., Warner Bros. plans ‘two-pronged approach in 2022. While most of its biggest titles will get exclu sive cinema runs, including The Batman and anew Aquaman flick scheduled for December, several other pictures will go straight to HBO Max. They ced 200218, an its mid-December opening Canstianbox fice neriy ‘double last enr'take $8b with family appeal, including a new Father of the Bride, and those aimed at adults such as the Steven Soderbergh thriller Kimi. “Most things don’t belong in a movie theater,” says Kevin Goetz, chief exec- utive officer of Los Angeles- based Screen Engine/ASI, which does market research for studios. With the cost of seeing a film in a cinema with a family of four approaching, $90, including concessions, “you better know that movie is going to deliver,” he says. “That's why peo: ple want to see superhero movies. ‘They want to see huge action-adven- ture movies.” Bloomberg Intelligence forecasts about $8 billion in U.S. and Canadian box office receipts this year. That would be short of the $11.4 billion in 2019, but still well above the $2.3 billion in 2020 and $4.5 billion in 2021, according to researcher Comscore Inc. It doesn’t help that the total inventory of 2022 films getting theatrical releases won’t Mlustration by Angela Stempeli t match pre-pandemic times, even with the big titles planned. Before the pan- demic, studios released about 140 mov- ies annually, according to Comscore. ‘That fell to 52 in 2020 and 93 last year, with only a slightly higher number expected this year. ‘Theater companies point to the diminished results of many big films released simultaneously online and in cinemas as proof that theaters still mat ter. “Doing a big blockbuster movie at the same time in a theater as on a streaming service was kind of a failed experiment,’ says Richard Gelfond, CEO of Imax Corp. “A lot of it was cannibal: ized by piracy over the streaming ser vice. And people just didn’t turn out. An event wasn't created.” For Ambulance producer Fischer, the ticket sales still registering for Spider Man tell him moviegoers are ready “and incredibly willing” to return to the big screen. “To me, that’s wow-the theatrical experience is alive and well he says. “It’s an experience you can’t have at home.” —Brian Eckhouse, with Christopher Palmeri . ‘ur Tries to HE Its Image, Again ‘The industry is betting a new certification program will win back consumers worried over animal welfare Few products have suffered a bigger image implosion than fur, Once a sta tus symbol for the rich, rock stars, and royalty, it's increasingly become stig: matized, a fashion fail synonymous with animal suffering and the ostenta tious display of wealth. ‘And yet, through decades of public protests, corporate boycotts, and vegan activism, the industry has lumbered on, thanks to Chinese mink shoppers and the global trend of fur trimmings > BIOGEN’S ADUHELM DRUG ‘The new Alzheimer’s treatment faces questions about its efficacy and cost Aduhelm, the first new Alzheimer’s treatment in almost 20 years, faces a major challenge in April when Medicare, which provides health coverage for 63 mil- lion elderly and disabled Americans, will announce its final decision on whether to cover the drug. It could be a make-or-break moment for Aduhelm, made by Biogen Inc. and Eisai Co., which are also seeking approval in Europe and Japan. The drug has confronted steep hurdles since the U.S. Food and Drug Administration approved it in June. Some doctors on an FDA advisory committee who doubted Aduhelm slowed the progression of Alzheimer’s resigned in protest when the agency overruled them and cleared the drug. Aduhelm went on to record just $2.3 million in sales in the first four months it was available. Biogen later halved the price of the drug, which is administered via monthly intravenous infusions, to $28,200 a year. The drug’s already questionable prospects became even more dismal on Jan. 11, when Medicare proposed restricting its use to patients in clinical trials. Agency officials said they’re skeptical any benefit will out- weigh potential harm, a bad sign for its final decision in April. With almost 6 million Alzheimer’s patients in the U.S. alone, any treatment that gains widespread use could be a blockbuster. But most insurers are refusing to pay for Aduhelm without more evidence of its efficacy. —Angelica Peebles a 2202 1 Avenue waINSNOD VaHY UVaA FHL ‘yoonssoupna Biequooia