This time last year I wrote, “the word for 2020 was COVID”. 2021 has again been dominated by the pandemic and its COVID variants. 2022 may well be the year that we all accept that COVID is here to stay and learn to live with it.
Last year I wrote, “If the COVID vaccines prove to be the answer to the COVID pandemic, 2021 may well be a good year for financial markets. Cautious optimism is the outlook from most fund managers”. 2021 was a good year for well diversified portfolios.
The economic concern for 2022 is inflation caused by supply shortages and high demand caused by COVID. Initially inflation was thought to be a transitional effect of COVID. However, inflation has stayed more persistent than expected and higher than expected.
Commodity stock or stocks related to commodities tend to do best in a high inflation environment. Commodity stocks include Newcrest Mining (Gold), Rio (Iron ore), BHP (diversified mining), Woodside (Oil) and others.
Financial stimulus from Governments round the world is likely to be reduced during 2022, known as quantitative easing. This could lead to less money being lent by banks or making it harder to get a loan. Hopefully, quantitative easing will not be eased too quickly which may lead to a rapid retreat of equity prices. Not good for portfolios
Oil prices are predicted to rise during 2022 and 2023.
My theme for suggested investment during 2022 is Newcrest mining, Woodside and an increased exposure to fixed interest and Bonds.
Volatility is again likely to continue in 2022 so again remain confident in your portfolio and its long-term strategy.
My view is that 2022 will be an interesting year. A year that is even more difficult to predict. Not many voices are suggesting a recession, but it cannot be completely ruled out. Be cautious this year is my advice.
The major banks have already started to increase their fixed mortgage rates. This is a sure sign that they expect interest rates to increase.