Here’s our view on what may happen in 2022!

2022 view cover

 Making plans for 2022 should include investing

At the start of every year, many of us sit down and write out our New Year’s resolutions. We list the things we want to do to improve our lives or achieve our goals, but surprisingly, not many people include plans for their money when writing out their dream year ahead. Investing for the future is a perfect new years resolution, even if you feel you have left it too late. 

 Why is this surprising? 

There are many reasons for financial inaction, for some it’s not having sufficient spare money to make plans with, for others, they just assume that what they have invested already will come through for them. Fact is, for most people, taking a long hard look at saving and investing doesn’t even make the shortlist of those topics shortlisted for the New Year’s resolution list. 

 If you were to include investing on your list, what would you say? 

For those who don’t save or invest yet I would suggest starting with a look at what they spend. At some point we have all said to ourselves – “I can’t save or invest; I have no spare money.”  In answer to that I would ask you to look at what you spend each week that you have nothing to show for now – I bet most of us spend £10 a week on things we can’t even remember what they were by the end of the week. Start small, make the changes now and you will be surprised how quickly it can grow. 

For those who save and invest already I would suggest you take a look at how well your investments did last year. Ask the people who look after your money to tell you clearly how much you made AND how much they made in charges. Did you earn more than they did? 

Wherever you are at the moment on your saving and investing journey, one very important question to ask yourself is “why am I saving and investing, what do I want to achieve?” 

 Best laid plans….. 

So, now you have a resolution and a plan what next?  

None of us have a crystal ball to predict the future, so many things can make our fortunes in the coming year change, especially in the stock market, so it helps to have an opinion on what you expect from the 12 months ahead. That might be something you are confident to do yourself or you may want someone like us to do that for you or with you. 

Things to think about to make sure your investments are ideally placed to make the maximum gains this year include – where are we in the business and economic cycle at the moment, what outside factors like interest rates and inflation might affect the markets and are you a bull or a bear? 

 Here’s what we think about 2022 –  

To consider what we might see this year, we have to look back a bit to see the factors that set up the position we are in at the start of 2022. 

The last 2 years have been very volatile, and we expect that to continue. We have seen technology shares rise strongly in some areas but not in others and already this year we are seeing some strong selling in markets as share prices in the US in particular have become, possibly too high to accurately reflect the value of the company. 

Contradicting that, we have seen the rise of the younger investor using trading apps and bringing a lot more money to the markets, they keep buying the dips and pushing prices back up again. Fears over a return to covid restrictions with new strains, rising interest rates and rising inflation all push prices lower again. 

In 2020 and 2021, government stimulus helped to revive economies and low interest rates helped to fuel confidence in the stock market, but that is all coming to an end now. In the US, the Federal reserve has already announced quite aggressive cutbacks in the stimulus programme and has confirmed rising interest rates, again, aggressively suggesting up to 4 rate rises in 2022. 

In the US the major indices like the S&P 500, the Dow Jones index and the Nasdaq have all risen to new highs, but when you look into it further, only a small number of very large companies have contributed to that rise, many companies are still showing falling share prices while some like Apple and Tesla have risen strongly. 

In the UK markets, which have languished for almost 3 years now, (the FT 100 index is still only just at the time of writing, below the pre pandemic January 2020 levels) and are not showing many signs of improving. 

Oil and commodity prices are rising and bitcoin is falling again. 

We have in many ways seen the perfect storm to get us to where we are today, everything the stock market hates has come at once – economic decline caused by the pandemic, inflation rising and rising interest rates. 

So, we think the year ahead is going to be difficult in stock markets across the world but as ever, in the middle of adversity lies opportunity and here are the main things we expect to see this year: 

  • Interest rates will rise and inflation is likely to remain, rising further before it comes under control. 
  • As economies start to recover from the pandemic without the government stimulus and low interest rate environment there is a strong possibility we will see a short 2 year recession. 
  • Markets will remain very volatile with outside factors like app traders contributing to that. 
  • The US markets will have some significant corrections but end the year slightly lower than they finished in 2021. 
  • The UK markets will continue to be difficult and we doubt we will see the FT100 rise back to pre-pandemic levels. We think they will end the year lower than they started. 
  • It’s going to be a stock pickers market this year, certain sectors will do really well, others will fail and some will languish where they are, so careful analysis and share selection is vital to making good returns, as opposed to just buying tracker or index funds. The latter are likely to underperform. 
  • Bond markets will also come under pressure due to rising interest rates making traditional safe havens difficult to find. 

So, an exciting and challenging year ahead with money to be made. If you would like to discuss our thoughts further, start your investing journey or work with us to review your existing investments get in touch at info@middletonprivatecapital.co.uk 

Learn about how to invest with us here.

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