In 2022, there is still so much uncertainty in financial markets. Record-high inflation, supply chain issues, concerns about rising interest rates, the war in Ukraine, and the fluctuation of COVID-19 cases have all thrown the markets out of whack.
Even in times of uncertainty, though, there are opportunities for investment. Here are three of the top investment trends to watch in 2022.
The Pandemic’s Continued Effect
More than two years after the initial outbreak, COVID-19 is still having a major impact on investing and the economy as a whole. While the job market has seemingly bounced back from the pit that was created in 2020, what has come with it is inflation and rising prices.
The federal government spent a lot of money to keep people, businesses and local governments afloat during the worst of the pandemic, and some economic pundits believe that “overheated” economic rebound is at least partly to blame for record-high inflation.
The Federal Reserve Bank is acting quickly and aggressively to try to slow inflation, by cutting off its bond buyback program and increasing the benchmark interest rate by a half-percentage point already–with more increases planned for the rest of this year.
Those increases have already sparked fears of a recession, which have sent financial markets tumbling in the second quarter of 2022. Will they rebound?
Eventually they will, of course, but when that will happen is anyone’s guess at this point. Still, there are always sound investments regardless of the state of the markets.
Some investors may view the current state as a great time to find values at large, proven companies such as Amazon and Apple, for instance. There’s also likely a trend to investing in companies that can withstand price increases–in other words, those that can compensate for their own increased costs by passing that onto consumers.
Alternative Investments as a Force
Alternative investments have been growing in popularity in recent years, and that’s likely to continue throughout the remainder of 2022. In fact, they could even increase in popularity as the stock market turbulence continues.
Digital investments are likely to lead this general asset class. That includes cryptocurrency, which attracted a lot of institutional investors last year. A study conducted by Fidelity Digital Assets reported that 70% of institutional investors planned to either invest in or purchase a digital asset.
Cryptocurrency has always been viewed as a very volatile investment. However, with the traditional stock market experiencing significant volatility of its own, more and more people are likely to try their hand at the various digital currencies available.
In comparison to traditional stocks, market capitalization for cryptocurrency is a mere drop in the bucket. But, that gap may continue to close throughout 2022 as it becomes mainstream. The first futures ETF that was based on bitcoin launched last year, and that could help attract more institutional investors.
ESG Investments as a Focus
Climate change is front of mind for many politicians and world leaders, and it’s attracting plenty of attention from investors as well. That’s why it’s largely expected that ESG allocations (Environmental, Social and Governance) are likely to be a huge focus throughout 2022.
Leaders around the globe continue to come together to create plans to combat climate change. This includes commitments to not only reduce carbon emissions but also to consider environmental impact in nearly everything they do.
The COVID-19 pandemic opened many people’s eyes to the need to create something sustainable–in life, business and investments, too. A shift to ESG investments started last year and is likely to continue throughout 2022 and beyond.
ESG ETFs are increasing in numbers as a response. There was a more than 51% increase in these ETFs from year end in 2021 compared to year end in 2020. These allocations include investments in sustainability projects, electric vehicles and renewable energy–and so much more.
These projects are not likely to go away any time soon, but they could start losing their “value status” from an investment standpoint. As a result, savvy investors are likely to begin incorporating ESG allocations in their overall portfolio, looking for long-term returns on these long-term projects.
These ESG funds are seen by many as shielded from significant risk because of the substantial investment being made in these areas by companies and governments across the world. In other words, there’s a major immediate demand and a relative shortage on supply.
Work with an Experienced Financial Advisor
Our knowledgeable financial advisors at Good Life Financial Advisors of Mt. Pleasant are here to help you plan your investments. Contact us today to speak to our consultants and learn more about the tools and guidance we offer.
Disclosures
The opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual.
Socially Responsible Investing (SRI)/Environmental Social Governance (ESG) investing has certain risks based on the fact that the criteria excludes securities of certain issuers for non-financial reasons and, therefore, investors may forgo some market opportunities and the universe of investments available will be smaller.
EFTs trade like stocks, are subject to investment risk, fluctuate in market value, and may trade at prices above or below the EFT’s net asset value (NAV). Upon redemption, the value of fund shares may be worth more or less than their original cost. ETFs carry additional risks such as not being diversified, possible trading halts, and index tracking errors.