Five things that will surprise us in 2021
A year without unexpected developments might be nice. But it won’t happen. Brace yourself for these five things, says Matthew Lynn.
1. Amazon splits itself up
One day the technology giants may regret their huge success in the pandemic of 2020. With vastly increased market share, the regulatory scrutiny has become intense. Antitrust actions have already started in the US against Google and Facebook, and Apple and Amazon won’t be far behind. But there is one point we should keep in mind. Amazon’s founder, Jeff Bezos, is by far the smartest business leader in the world today. He might be thinking, why not get one step ahead of my opponents and break up my empire myself, rather than waiting for my opponents to do it? The company could be split into retail, for its massive direct sales operation; cloud, for its business services; and streaming, for its TV, e-book and music unit. Bezos could keep control of each of the three “baby” Amazons – and the regulators wouldn’t have anything to attack anymore.
2. Mercedes and BMW merge
The big German luxury car manufacturers were in trouble even before the Covid-19 pandemic ravaged new car sales. They were the best in the world at making big, gas-guzzling luxury cars. But with the rise in electric cars, Tesla has easily eclipsed them (it is bigger by market value than both combined) and, as hard as they try, it is too late for them to catch up now. If they are to have any hope of making a successful transition to both battery-powered and then driverless vehicles, they will need to combine. The brands still have a lot of value left in them, but it is going to cost a fortune to transform their businesses completely – and a merger is the best way to achieve that.
3. Switzerland switches to bitcoin
The Swiss franc may be one of the oldest and most stable currencies in the world, but for a decade now it has also been a problem. Wildly overvalued, it has crushed Swiss industry and destroyed its competitiveness. Nothing the central bank can do brings it down and Switzerland has been officially labelled a “currency manipulator” by the US Treasury. One solution: ditch the franc for something else. Switzerland is never going to adopt the euro. But why not bitcoin? Switzerland was already one of the first countries in the world to give it a legal status. Make it an official currency alongside the franc and many of its problems would melt away.
4. Gig workers become official
The big rises in employment have all been in the gig economy and the fastest-growing technology companies, from transport to accommodation to food delivery, are built around temporary workers. Trying to fit everyone into the straitjacket of 20th-century employment and tax law will make less and less sense, especially as the Covid-19 crisis has turned just about every business into a digital operation. Expect a government somewhere to create a legal category of gig worker, with some of the rights and responsibilities of a traditional employee, but with a lot more flexibility. Once it does, it will catch on globally.
5. The FTSE 100 hits 10,000
With the UK facing one of the worst outbreaks of Covid-19 in the world, and breaking away from its main trading partner, it might seem like a miracle that the benchmark FTSE 100 index is above 5,000. The six-digit level seems a long way away for an index that is still below its 1999 high. Three things could change that. Once Brexit is out of the way, a lot of the pessimism around the prospects for the UK will start to evaporate. The UK’s services- and leisure-dominated economy has been hit hard by Covid-19, but that means it might snap back faster. And the FTSE has been dominated by dull oil, banking and pharmaceutical stocks. But if the boom in tech initial public offerings continues they may be pushed aside by more exciting, faster-growth firms (while pharma is about to get exciting again). The London stockmarket has been among the world’s worst performers globally for two decades now. But once investors’ sentiment starts to change, it does so very rapidly, and usually ends up over-shooting in the other direction. The FTSE at 10,000 might not be as fanciful as it seems.