YEARLY SNAPSHOT

The stock market year 2021 was defined by new investors on the stock exchange and the rising prominence of social media. Many crucial metrics for company valuation, on the other hand, were tossed out the window.

A lot of what shaped the stock market year 2021 at the end came together in the hustle and bustle of the GameStop share at the start of the year: young investors flocking to the markets, the increasing importance of social media for financial investments, new brokers dealing with expensive shares turned inside out – and last but not least, excessive exaggeration.

For a long time, many market participants have been warning about this.

Despite concerns about competition and supply chains, prices in Germany, the United States, and Europe increased in 2021.

This is partly attributable to the fact that, in a low-interest-rate environment, investors perceive few alternatives to the stock market for protecting their money from depreciation in the face of strong inflation.

In the interim, several vital figures that are critical for company appraisal have been tossed out the window.

Those who have lost sight of the benefits and genuine value of anything due to greed must be prepared for unpleasant surprises.

In 2021, investors in the Chinese market, where regulatory issues have long been obliterated by the claim that the nation has enormous potential, may see this.

2022 GLOBAL STRATEGY OUTLOOK

The current market cycle has been extremely volatile and fast-paced. Investors are now confronted with a completely unusual dynamic for the year ahead—early-cycle timing, midcycle circumstances, and late-cycle values, as well as excitement.

Inflation Will ‘Peak Then Retreat’ in Major Markets

While inflation will be stronger than many investors have witnessed in the past, it is expected that prices will “peak then recede” as supply chain pressures subside and prices for many commodities return to normal. As a result, central banks are unlikely to adopt dramatic steps such as raising interest rates or slamming the brakes on growth. Investors, on the other hand, have a Pavlovian reaction to any mention of tightening, which is just one of many reasons to be cautious when it comes to US stocks and Treasuries. Emerging markets appear to be set for development, but experts think it’s too early to be all-in on such markets.

“In China, energy pricing, regulation, and COVID remain hurdles, and our expectations do not call for considerable policy relaxation, at least not yet,” Sheets adds. “The one exception is high-yield credit in China, where we believe the market underestimates regulators’ will and capacity to handle the property sector upheaval.”

Here are five key points from the Global Investment Forecast for 2022.

1. Is It Time to Sell U.S. Stocks?

According to analysts, the S&P 500 index might fall 5% in 2022, while other developed markets could conclude the year higher, a stance that would “most certainly raise eyebrows,” according to Sheets. They advise underweighting U.S. stocks to account for high valuations, more catch-up potential, and lower volatility in other markets.

“While stronger and more sustainable profit patterns have fuelled U.S. stock price outperformance for much of the previous decade, the concern is growing surrounding cost pressures, supply difficulties, policy uncertainty, and tax changes,” writes Mike Wilson, Chief U.S. Equity Strategist.

2. Stocks from Europe and Japan are beckoning

Stock markets in Europe and Japan, in contrast to those in the United States, are more reasonably priced and focused on growth. “Their central banks should be extremely patient due to lower inflationary pressures,” adds Sheets, whose team advises investors to overweight both markets.

Equities in Japan continue to produce rising returns on equity, while economic stimulus, corporate reopening, and solid global Capex all point to a 12% increase in Japan’s stock market next year.

Meanwhile, for the first time in 20 years, the MSCI Europe index has outperformed the rest of the world, and this trend is expected to continue as a result of increased mergers and acquisitions, buyback activity, and changes in investor positioning, as many global portfolios were underexposed to the region.

“Our combined earnings and valuation assumptions suggest that European stocks may yield an 8% price return and a double-digit total return,” says Graham Secker, Chief European Equity Strategist.” Autos, energy, and financials are among the team’s top sector recommendations, which should all profit from the increase in real rates.

3. Stock Selection May be More Important Than Style or Sector.

Health care, financials, and secular technology businesses, according to Morgan Stanley strategists, should expect gains in the next year. As supply and demand dynamics return to a more normal pattern, consumer goods and cyclical technology companies may lag.

Even yet, there are fewer possibilities for investors to profit on large movements in styles and sectors than at earlier times in this market cycle.

“The economic and political landscape has irreversibly changed from pre-COVID days,” Wilson argues, “but the changes are not necessarily related to the pandemic itself.”

4. Government Bonds Come in All Shapes and Sizes

The COVID-19 epidemic was met with near-uniform interest policies and a flood of cash by central banks in developed countries.

Bond markets, on the other hand, will have to make sense of various policies by 2022. In anticipation of the 10-year Treasury going beyond 2% by the end of 2022, strategists advocate underweighting US Treasuries, particularly those with intermediate maturities. They also believe that agency mortgage-backed securities will be harmed by high valuations and increased volatility.

According to analysts, local developing market debt is starting to seem promising, but investors should be patient.

5. Oil Takes the Lead in Commodities

Commodities beat the S&P 500 for the first time in a decade in 2021, for several factors. Stagflation fears and the postponement of rate rise expectations have boosted gold prices, while base metals have benefited from a combination of limited supply and growing demand.

Metals may lose their sparkle in the future as high real yields weigh on gold prices, while copper and zinc prices decline as supply improves. Aluminium is a favoured choice among strategists, who cite cyclical and structural considerations as justifications.

TOP 5 STOCKS TO WATCH

1. NVIDIA (NVDA) 

The cryptocurrency era is here, and NVIDIA is at the centre of it all. NVIDIA processors, which once dominated the gaming sector with their Graphics Processing Units, have found a new role for crypto miners. NVIDIA has applications in AI, data, and medical research centres, in addition to the demand boom affected by the emergence of bitcoin.

NVDA’s stock has climbed from around $32.66 per share to over $200 since the beginning of 2019. The company’s excellent performance emanates confidence and indicates that it intends to rule the hardware industry.

2. APPLE (AAPL) 

Apple is a name that needs no introduction, and they are widely regarded as a global leader in consumer electronics, software, and services. The company’s reputation is even stronger on the stock market, with its rise in 2022 regarded a substantial boost. Apple’s iPhone, iPad, accessories, and services all saw significant growth, resulting in strong profit margins.

While the stock is rather volatile, the $147.54 price per share represents undeniable improvements. Apple is a good company to add to your portfolio if you want to diversify your tech holdings.

3. AMAZON (AMZN) 

Amazon’s narrative is unique, and its influence on internet shopping demonstrates that it is a foresighted company. Amazon forayed into a sector where brick-and-mortar businesses relied on walk-in consumers, delivering services and items to customers’ doorsteps. Naturally, increased relevance leads to improved market performance.

Amazon’s stock has climbed from around $2,545 to over $3,500 since June 2020, one of the market’s most significant gains. The firm is at the epicentre of the e-commerce revolution, and its long-term stability indicates that it will continue to grow in the years ahead.

4. FACEBOOK Inc. (FB) 

With over 1 billion daily active members, Facebook is a major participant in the social networking space. Its assets, such as Instagram, Workplace, WhatsApp, and the Facebook platform, demonstrate its success.

Facebook is a significant investment opportunity, having been listed as a top stock and amassing a market capitalization of $1 trillion. While the stock has risen in value, it remains appealing to investors who find value in the firm’s 33 percent gain this year. The stock’s strong performance and supremacy in its industry make it a worthwhile investment.

5. MICROSOFT (MSFT) 

There is no better success storey than Microsoft’s ascension with its Windows and Office software suites. Market shifts in the 2000s appeared to plunge the software behemoth into obscurity. But, as fate would have it, cloud computing would resurrect the giant.

Microsoft has given Amazon a run for its money in the cloud industry as a company that predicted cloud computing. Microsoft’s stock has increased fivefold in value as a result of a new business strategy. Amid global worries, investing in Microsoft might be the safest bet in the market.

CRYPTO IN 2022

1. Ethereum – The Show-Stealer

The Ethereum blockchain boasts of being “the world’s programmable blockchain,” capable of hosting a wide range of applications. Although it followed Bitcoin’s route, it set itself apart by being the source of the majority of financial services, games, and apps in the crypto world. Because of the blockchain’s decentralised structure, it can maintain a safe network.

The quantity of ether that may be created has no limit, and the supply is intended to grow by 4.5 percent per year. Every block produces two ETH. Ether is used by every protocol or application on the network. The more the demand for ether and the higher its value, the more the blockchain is used. ETH is presently valued $4,056.72 on all exchanges and can be purchased on any of them. With a market capitalization of $482.2 billion, it is second only to Bitcoin.

2. Bitcoin 

Bitcoin has reached five all-time highs since its inception in 2009, the most recent of which was $69,045 on November 10, 2021; it is now trading at $50,186. Market demand for Bitcoin like other assets is one of the variables that influences its price. This means that as the demand for Bitcoin grows, so does the price. And, because Bitcoin has a finite quantity, the closer it approaches to its limit, the higher its price. In addition to market demand, the marginal cost of manufacturing may have an impact on the price. Bitcoin grows at a rate of 200 percent on an annual basis. As a result, governments and organisations are scrambling to learn everything they can about cryptocurrency and blockchain technology. The rising usage of Bitcoin in speculation and derivatives will also have an impact on the price. Bitcoin has a market capitalization of $948.5 billion.