After two years of lockdowns, travel restrictions and disruption across the globe, 2022 is greatly anticipated as the year we can all finally settle back to a more normal routine. The hopes of recovery in industries that have been affected and opportunities to deliver new solutions in a post-covid world offer an exciting prospect for investors; here is our breakdown of assets that we think you should be aware of in 2022:
Opportunities:
Real Estate – With inflation now at levels not seen since 1982 (7% in the US) and central banks printing money like it’s going out of fashion, tangible assets such as property are likely to maintain a strong demand. The UK real estate market is particularly attractive with the strongest possible legal framework and lack of supply fuelling increasing asset values and rising rental yields. Investors should focus on affordable housing to guard against another global recession, where demand significantly outstrips supply and end-users are primarily government-funded.
Bonds – Investors are becoming increasingly wary of ‘risk-on’ assets such as stocks, with expectations of volatility and consistent commentary of overvalued markets. Bonds offer investors the perfect mix of capital protection and above-inflation interest rates whilst maintaining liquidity for short term capital requirements.
Gold – The traditional safe haven of gold looks very attractive in 2022, with inflation out of control and governments printing money at an alarming rate- gold should feature in all investors portfolios.
Digital Assets – Bitcoin has started the year with losses and most other cryptocurrencies; however, there is a growing acceptance of digital assets amongst the financial community. The drive to become mainstream is gaining pace. There is now a significant opportunity for Bitcoin to grow in value as an alternative to gold, hedging against inflation and reducing risk from central bank policy changes. We believe that Bitcoin could reach far higher values in 2022 and beyond.
Risks:
Equities – In our view, stock markets are heavily overvalued and represent a level of risk that is unwelcome to most retail investors. Stocks have benefitted from the fiscal recovery policies of most major governments as people have more investable income than before covid; with banks offering zero interest on savings, the stock markets have received disproportionate amounts of fresh capital.
Investors now need to consider the risk of a correction or crash in global markets, we are 13 Years into the longest bull-run in history, and the S&P500 rose +26.89% in 2021 alone. Markets will inevitably fall in the short to medium term, and 2022 offers major potential triggers for a stock-market rout.
Cash – With inflation now at 7%+ and banks offering zero interest rates, money in the bank is currently making you poorer every day; it sits there in real terms. Investors need to move into assets that can keep pace with inflation as cash is not an option in today’s economic conditions.
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