2021 was dedicated to economic recovery, following 2020’s rollercoaster of a year. Although COVID-19 is certainly still a major influence, the economy is stronger and more resilient than most had anticipated a year ago. Analysts expect growth to continue in 2022, and we’ve gathered some of the top trends to keep an eye out for this coming year.
A big year for cryptos
Crypto outperformed all other asset classes in 2021, and we are likely to see an acceleration in the adoption of cryptocurrency by the $250 trillion institutional market as we move through the next year. This predicted adoption is still at a very early stage, but seems to be further boosted by the acceptance of cryptoassets as inflation hedges and as a means to diversify risk. With increased regulatory clarity and new investment products, we may be looking at another big year for cryptos in 2022.
Big tech going bigger
The big tech companies are the new defensive stocks, usually providing steady and stable earnings. Companies such as Google, Amazon, Microsoft, and Apple benefit from strong all-weather profits growth, combined with fortress balance sheets. This makes the major tech stocks’ valuations seem very undemanding, and they are considered core assets to most investors’ portfolios these days.
“Buying the dip” with reopening stocks
Companies with otherwise solid financials, which were most sensitive to virus trends and have benefited from the loosening of pandemic restrictions, such as airlines, hotels, and restaurants, are expected to do well in 2022. Economies, consumers, and businesses are becoming increasingly resilient to each new virus wave, with global vaccination and more treatments on the rise. So-called “reopening stock” companies’ earnings are still depressed for the moment and the prices are cheap, making the risk/reward attractive to bargain hunters.
The future is in renewables
The renewable energy sector is growing rapidly, with governments, investors, companies, and consumers accelerating the race to zero emissions. This requires a tripling of current investment in renewables to over $3 trillion a year, benefiting industries from electric vehicles (EV) to green energy batteries, solar, and wind power sources. EV sales alone, for example, are forecast to rise over tenfold by the end of the decade.
Commodities in a sweet spot
2021 found commodities in a rare “sweet spot” of strong demand, tight supply, and increased investor interest. Green commodities, such as copper and nickel, have an edge because of the aforementioned race to net zero — but fossil fuels, such as oil, are also benefiting from a supply squeeze in the interim, due to decreased investment given environmental concerns. This is allowing producers to both pay high dividends and fund their carbon transition plans.
Whether you’re a veteran investor or just starting out, it will no doubt be interesting to see how these five trends play out in the coming months, with others certain to emerge. Part of the fun on eToro is getting the inside track on what other investors are talking about right now and joining in the conversation!
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