Going into 2022, a lot of investors were very optimistic as far as financial markets and the U.S. economy are concerned. Both of them had an impressive comeback after the challenges brought by Covid-19 in 2021. Stimulus checks and vaccine breakthroughs further created a positive outlook for the country’s economy. Nonetheless, higher interest rates, geopolitical conflict, and rising inflation have stood in the way of continued economic growth. It has become tricky to predict how things will be in such unprecedented times. Single-stock analysts, economists, and strategists all failed to make accurate predictions for 2021.
As an investor, there are certain things you should consider to maximize your returns. Considering the economic disruption brought by the coronavirus pandemic, it would be a good idea to look at certain trends to be on the safe side. Below are 5 Investment Trends to Look Out for in 2022
1. Inflation will Continue to Bite
Although a lot of growth is expected in 2022, investors should expect higher inflation rates compared to the previous year. This is due to the increase in food prices, energy and supply chain challenges. The cost of labor has also gone up because of skill shortages perpetuated by the pandemic.
Investors should try looking for opportunities connected to an inflationary environment. For example, you can consider active managed fixed-incomes portfolios such as bonds. Other assets to consider are equities and commodities. The idea is to avoid investments that are easily affected by inflation. It would be a good idea to talk to an investment expert before making the final decision.
2. The Rise of Disruptive Technologies
The pandemic hit hard most sectors of the economy including travel, entertainment, and hospitality. Small businesses, particularly those that haven’t embraced technology suffered the most. But those who had already invested in technology appeared to have mitigated the effects of the pandemic. The period after the pandemic saw a lot of innovations and investments in technology.
This is likely to continue in 2022. Investors need to pay close attention, especially to how such technologies will affect bricks-and-motor business models. Small companies that have invested heavily in technology are likely to offer more returns. There’s going to be a continued rise in the emergence of disruptive technology in various sectors.
3. Investing in Infrastructure and Alternative Assets
Inflationary pressures and uncertainty may force investors to diversify their portfolios in alternative assets like commodities, private equity, cryptocurrencies, and real estate. Alternative assets are always a great way of diversifying and enhancing returns.
There are many ways of doing this. For example, you can create your own NFT and reap the benefits that come with it. However, you need to understand the uses, benefits, and risks of alternative assets before investing in them.
4. Real Estate Will Remain Steady
One of the most lucrative investment opportunities in 2021 was real estate investment trusts (REITs). This trend is likely to continue in 2022. REITs focus on apartments, residential homes, hotels, hospitals, data centers retail stores and office buildings. As per the law, a REIT is supposed to divide a minimum of 90% of its taxable income as dividends.
The coronavirus hit the real estate and hospitality industry so hard. However, the two industries appear to be recovering much more quickly. The COVID-19 pandemic increased the performance of prefabricated homes, long-term rental housing, biotech, and pharmaceutical innovations among others.
5. ESG Investment Movement
Investment experts often advise people to remove their emotions from investing. But a new crop of ethically-minded investors has increasingly become interested in investing in areas where their values are in the past few years. This technique is referred to as environment, social, and governance investing. (ESG).
When Russia invaded Ukraine in 2022, it sparked global protests and condemnation from different countries. Most American companies reacted by terminating their operations in Russia and committed to supporting democracy in Ukraine. The war in Ukraine is an example of organizations looking past the bottom line when it comes to business decisions.
These are some of the common trends that are likely to impact the 2020 investment landscape. If you are unsure of where to put your money or how the above trends will affect your existing investment portfolio, talk to a financial expert for further guidance.