The current bull market, which began in March 2020, turned 21 months old in January 2022. Over that short period of time, the S&P 500 has more than doubled, climbing 118%. To put that number into perspective, the S&P 500 has already outperformed the 2002 to 2007 rally.
In 2021, the S&P 500 rallied just under 30%. While it might be tempting to think the market rally will continue at this torrid pace in 2022, it’s always impossible to predict what will happen. What we do know though, is that there will, as always, be challenges and opportunities. This year is no different, even as we continue to navigate the pandemic.
2022 Could Be Challenging but Also Exceptionally Profitable
If anything, the pandemic, which has caused a historic shake-up of the global economy and business cycle, will continue to be a driving force on Wall Street and Bay Street. But not the only one. Rising interest rates, inflation, rising bond yields, and monetary tightening will also play important roles on corporate earnings. And of course, we know there will be Black Swans to contend with. The big questions will be how the stock market responds to these shocks.
Here are three investing trends to watch in 2022.
Small Cap Stocks Could Jump
With investors all in on blue-chip stocks and trillion-dollar companies like Apple Inc, many have overlooked small cap stocks. Despite the fact that the U.S. and Canadian economies are doing relatively well, many excellent small cap stocks have seen their share prices tumble by more than 50% in 2021. Based on recent data and fundamental analysis, small-cap companies are a lot less expensive than large-cap companies. 2022 could be a good year for depressed small cap stocks.
Value Stocks Could Also Surge
Value stocks could also be another big investing trend in 2022. When it comes to investing, growth stocks are more fun to invest in. It’s not uncommon for up-and-coming tech stocks to realize triple or even quadruple price gains over the course of a year. But with interest rates rising and inflationary pressures, growth stocks could continue to experience headwinds in 2022. Investors could see value stocks as a much safer bet in 2022.
Gold Prices Face Pressure
Gold went on a huge run in 2020, rising 32% from $1,531 per ounce at the start of the year to $2,024 per ounce in August, before settling and finishing the year up 23% at $1,895 per ounce. It was a different story in 2021, with gold prices down roughly four percent at roughly $1,810 per ounce. Gold could be in for another tough year as gold miners deal with the pandemic, inflation, rising operating costs, and potentially flat-to-declining gold prices. Competition from cryptocurrency as a hedge against inflation could also derail a gold rush in 2022.
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U.S. and Canadian stocks have been on a tear since bottoming in March 2020, with the S&P 500 and TSX at or near record levels. Investors may be looking for more of the same in 2022, but the markets will continue to face a number of challenges, including the coronavirus pandemic, inflation, and rising interest rates. While some investors may want to sit on the sidelines and take a wait-and-see approach, the trading experts at Learn-To-Trade.com can teach you how to spot investing trends and make money when the markets are going up, down, or sideways.
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