text: InFocus: Outlook for next yearInstitutional investors, such as banks (including the Federal Reserve), hedge funds, and private equity firms have started to articulate plans for traversing a financial landscape which will change constantly. Next year will likely include significant changes to supply chain operations, dynamic inflation measures, job market health, and rising interest rates. Each of these components shares some interdependence, and substantial change to one will likely affect several others.Supply chains experienced unparalleled strain during the second half of 2021. Next year, supply chains for automobiles, semiconductors, raw materials, and finished goods will likely see a declination of quality into Q2 before realizing any improvement headed into the second half of next year. While employment has been improving, data for November only resulted in 210,000 new jobs after an expected 573,000. At the same time, unemployment fell to 4.2%, a 0.4% decline from 4.6% in October. Most of these jobs were gained in the “professional and business services” sector, with the majority in the transportation and warehousing professions. Although the labor participation rate for supply chain-related positions is increasing, it does not address or solve shortages in raw materials. Demand is far more likely to fall before supply can increase to sustain current demand. As a result, overall demand will probably remain elevated compared to measures before the pandemic, thanks to marginally increased supply.Goldman Sachs expects that inflation will begin to normalize after “July 2022,” when Goldman says the Fed will start to raise interest rates. Goldman says “we expect a funds rate hike every six months,” and inflation “should settle 0.5% above the pre-pandemic level on average, in part because central banks have tweaked their goals accordingly.” Inflation is at 6.2% right now, and data for December is due next week when we will likely see another increase. Larry Summers suggests that inflation “we’ve got some real trouble ahead of us” when considering factors such as home prices, the consumer price index, and the rate at which employees are quitting. He says that inflation will “possibly get worse for the next several months” before we see any alleviation. Head Economist of Commercial Banking at JPMorgan, Jim Glassman, says that “inflation should start to subside by the middle of 2022, but the early part of the year may see little relief from 2021’s runup in prices.”Contrary to anyone else, Cathie Wood still expects deflation during the second half of 2022. She believes that commodity prices will collapse, demand will not meet suppliers’ stockpiled inventories, and companies that have not implemented innovative technologies will fail. Additionally, she believes that those innovation trends, such as robotics, artificial intelligence, and blockchain technology, will accelerate and grow significantly. This will likely bring the companies that implemented these components to the top of the growth list during 2022.