These are just a couple of headlines currently bringing attention to the growing inflationary pressures. The price of commodities as recorded by indices such as CRB and S&P GSCI and the cost of moving goods around the globe, which can be seen by an index such as Baltic Dry, are closely watched by governments and central bankers. The trend of indices such as these three are often followed as a key indicator to watch when determining whether to change interest rates. 

Source: Trading Economics.com

Therefore, it will not have gone unnoticed that inflationary pressures have been rising in 2021 and, given the recent hike in energy prices, the cost to move goods around the world will have added to these inflationary pressures. As energy prices rise, there is an impact on the cost for fertilizers (as can be seen from the chart below) and certain agricultural produce is diverted to making ethanol whereby reducing the amount for sale as feed stocks for animals and food for humans, therefore raising its price and so increasing inflation.

Source: Farm Policy News

According to the fund manager, Cazenove, US equity markets have enjoyed a total return (share price growth and dividends included) of over 4175, having risen for over 9.5 years and making this the longest ‘bull market’ for equities ever. But even those who do not follow stock markets daily know that nothing continues to rise forever. At some stage we will see a fall in share prices, which is actually the reason many less sophisticated investors tend not to invest in stocks and shares for fear of the fact that prices do, indeed, fall as well as rise. There is a genuine concern that, given the levels of debt governments have taken on especially due to the massive handouts due to COVID-19 together with the levels of borrowings by companies, the impact of rising interest rates could well prove fatal for some companies. According to analysis from Retire Before Dad, there are now only four companies in the S&P 500 that are net cash positive and, as the list below reveals, most are not exactly household names nor are they exactly trading on low Price Earnings ratios (P/Es).

List of Debt-Free S&P 500 Companies 2021

Source: Retirebeforedad.com

Therefore, the question has to be - where will investors place their capital in the event that interest rates are forced to rise thus undermining bond prices (which have performed so well as quantitative easing has crushed yields and driven up bond value) and potentially triggering a fall in stock markets? Historically, real estate, precious metals such as gold and silver have performed well when inflation rises. However, thanks to a much more globally interconnected world economy, much of which is conducted on-line, the speed at which asset prices can change is fast. Added to this, we now have a new range of digitally traded assets that do not respect traditional national boundaries and countries but offer investors the ability to trade 24/7/365 and are competing for investors’ capital as never before.

In the last year we have seen tremendous growth in capital being allocated to assets such as Non-Fungible Tokens (products traded on De-Centralised Exchanges). In a survey of US crypto investors, 55% of them had bought cryptos for the first time in the last year of which 91% of whom had sold their Bitcoin holdings, had done so at a profit. The summary from the Royal Bank of Canada offers some insight to just how far the adoption of crypto assets has come.

Source: Royal Bank of Canada

Blockchain technology has been accused of being unscalable and not able to handle the number of transactions compared to the volume of transactions that Visa or Mastercard cope with. Well, just one blockchain (Ethereum) seems to have proved the naysayers wrong. Even national institutions such as the British Museum are involved with NFTs, and even sports such as rugby and the German Bundesliga are engaging.

There have been many examples of how Blockchain technology is being used in the finance sector, making payments cheaper and faster and very much encouraging and helping to make banking and the wider financial services more inclusive. According the World Bank this is particularly important since, in some countries, as many as 61% are unbanked. Furthermore, of the 1.7 billion globally without a bank account, women account for 55%. However, with ownership of a mobile device and a link to the internet it is possible for those without a bank account to use digital currencies and even access those DeFi platforms offering lending and deposit services. In terms of earning an income, the European Business Review lists 10 on-line games which use NFTs and enable gamers to be paid while they play. So, next time you see your son, daughter, grandchild etc with their head bowed and fingers feverishly cursing across a keyboard, maybe they are being paid a lot more than the pocket money offered to them for doing domestic chores?

Blockchain technology is also being used in a variety of other ways. Self-Sovereign Identity (SSI) is one area that is promising to make our lives much easier by helping us to share our personal information in a more secure manner. Instead of being required to send copies of utility bills, bank statements and ID (such as passports and driving licenses), digital SSI enables personal data to be held cryptographically (i.e. in a highly secure format) thus enabling individuals to share only relevant data with whom they wish. Fraser Edwards, CEO at cheqd, a technology company enabling individuals and organisations to take full control of their data, maintains, “SSI provides an unparalleled opportunity to both return data security and privacy to individuals by allowing them to hold and control their own data but also for businesses to create new services combining historically siloed data sets, which are now centralised around the user." Furthermore, the National Institution for Standards and Technology has also been researching how Blockchain technology is able to protect digital identities - a list of some of its research papers can be found here. 

Meanwhile, within the healthcare industry the use of blockchain-powered platforms is increasing as capital is being invested on a worldwide basis. It is estimated that global spending on Blockchain technology in the healthcare sector will grow at over 82% p.a. to reach $394.6billion by 2028. Some of the areas where blockchains are being used include ensuring that patient records are more secure, improving the efficiency of medical supply chains, and helping healthcare researchers to unlock genetic codes and so develop new medication and treatments.

Voting is another area where Blockchain technology is able to play a role by guaranteeing that each vote is recorded using cryptographic security, followed by the use of smart contracts and potentially SSI to ensure that the correct ballot papers are sent to the right people - whether they be shareholders in a company or citizens in a country. This promises greater transparency as results can be seen if required, in real time, (something that company boards and their advisors would find very helpful) and then maintained, whereby providing an immutable record of the results as to how votes have been cast. Compare this to the current process of using pieces of paper and the risk of needing a recount etc, which is all too common. Of note though, a report from Massachusetts Information Technology (MIT), was shown to be less than positive about the use of blockchain-powered platforms for voting, believing that: “it will increase cybersecurity vulnerabilities that already exist, it fails meet the unique needs of voting in political elections and it adds more issues than it fixes”.