Money Magazine: Five predictions for investment markets in the new year

In the News

Publish date: 1 January 2022

What can we expect in the changing landscape of investing? Here are my top five predictions for 2022.

The new year sees us enter our third year of the pandemic. While I believe the Omicron variant of COVID-19 will drive a third wave of infections – and potentially our biggest wave yet, I’m hopeful it will prove to have milder health impacts than its predecessors.

As investors, the pandemic has seen us go through an exceptional period of learning over the past two years. So the psychological impact of COVID-19 is becoming less significant. This is leaving us better placed to look ahead, consider emerging trends – and understand how we can tap into them.

Here are my predictions for what we can expect across investment markets in 2022 – and how investors can benefit.

1. Blockchain will shine

Mention blockchain, and inevitably Bitcoin comes to mind. But blockchain has always offered so much more potential than a chance to dabble in cryptocurrencies.

All the signs are in place that 2022 will be the year of Web 3.0 – the next evolution of the internet. And it will be driven by the adoption of blockchain technology – with decentralised ledgers fast-tracking transactions.

Companies like Oracle, Accenture and IBM are already heavily invested in blockchain. So, yes for investors there are opportunities within the tech sector. But that’s just part of the blockchain story. We will see the effect extend much further, to impact everything from the mining sector to supply chains.

2. Rising inflation will drive active investing

Low inflation has been part of the investment landscape for some time. But that’s about to change especially as interest rates rise, and it can call for a more active approach to investing.

We’ve seen a tremendous uptake of exchange traded funds (ETFs) in recent years. But they involve a passive approach – one where investors accept the returns generated by a given market index.

For many, this strategy has worked well to date. Companies have benefited from a low rate/low inflation environment, and as a consequence sharemarkets have delivered strong annual gains.

As inflation rises in 2022, we will see a pull-back in growth stocks. Investors are likely to benefit from a more active approach, one that seeks undervalued shares with growth potential, while still having exposure to passive investments. Jaaims can help here by delivering data-driven recommendations on which stocks to select, free from human biases or emotions.

3. Electric vehicle inadequacies will hit boiling point in 2022

I believe 2022 will see the adoption of electric vehicles (EVs) really take off in Australia – at levels that far exceed government forecasts. As a result, our lack of preparedness for EVs will reach boiling point.

It’s not just about practical issues like lack of charge points for EVs. Carmakers receive attractive government incentives to supply markets in Europe and elsewhere, making it much more compelling to supply these markets rather than Australia.

Add in ongoing global supply chain issues, and buyers of new EVs could face long delays. That’s set to push up the value of used EVs – great news if you own an electric vehicle. For investors, it can make certain stocks attractive such as Carsales.com, Tesla (listed on the US market) and Daimler (German market), which manufactures Mercedes EVs.

4. The Great Resignation will be a fizzer

Microsoft’s 2021 Work Trend Index suggests 41% of the global workforce is likely to consider leaving their current employer within the next year. It’s coined the term ‘Great Resignation. But I’m not convinced.

Lockdowns have seen people crave the support of a team environment, and the uncertainty of COVID has underpinned a new appreciation for job security.

If the Great Resignation turns out to be a fizzer – as I expect will be the case, investors are set to reap the rewards. It means listed companies will avoid the high recruitment costs and disruption of large-scale resignations, and that’s always good for business.

5. The federal election will result in a hung parliament

With a federal election due in 2022, I’m expecting the result to be a hung parliament. Voters are becoming more supportive of community-based independents, and it’s likely we will see record levels of independents winning Lower House seats.

A change in government often rattles asset markets. The key take-out for investors is to sit tight and ride out any post-election jitters. The impact of an election is usually short-term, and doesn’t call for a radical portfolio overhaul.

This article was originally published in Money Magazine on 1 January 2022.

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