Here’s what’s hot in the stock market right now

As we head towards the end of the year, I feel it’s important to look at the stocks I want to buy and hold in 2022. There’s plenty going on at the moment in financial markets. A potential China slowdown, interest rate hikes being looked at around the world, along with concerns about inflation. Despite all of this, there are pockets of the market that are doing really well now. So this is what’s hot in the stock market right now and could make good additions to my portfolio.

The travel sector

Leading the pack over the past month have been companies that benefit from international travel picking up again. This coincides with continued relaxation and simplification of travel rules both here in the UK and beyond. Moving to just a red list of countries that need quarantine, as well as future plans to allow a lateral flow test instead of a PCR test will make it easier for people to travel.

This has benefited airline stocks, such as easyJet and International Consolidated Airlines Group. Over the past month, their share prices are up 13% and 33%, respectively. Over a longer one-year period, both stocks are up at least 50%.

Others associated with this sector, such as Rolls-Royce and TUI, are also doing well. Both rank in the top 10% of stocks in either the FTSE 100 or FTSE 250 stock market for share price returns over the past month.

Personally, I think these stocks can move higher still into 2022 if things continue as planned. Obviously, the risk here is that the winter throws up higher Covid-19 infection rates that could see countries bring back some travel restrictions. 

Stock market picks from banking

Another area of the stock market that’s hot right now is banking. Within the FTSE 250, Investec shares are up 18% over the past month. This makes it one of the best performers in the index. Over a one-year period, the stock is up 117%.

In the FTSE 100, five of the top 15 stocks in the past month are banks. Over a year, the lowest return from this group is +36%. In my opinion, this area is hot in the stock market right now for two reasons.

First, expectations are really shifting on when different central banks are going to raise interest rates. In the UK, some think that the Bank of England could raise rates before this year ends. These expectations in the short term have helped to boost banks, as their profit margin is higher when interest rates are increasing.

The second reason is that the UK economy has done better than expected since the depths of the 2020 crisis. This means the banks haven’t lost as much due to loan defaults or lack of spending/payments.

Looking forward, I think that banks are a good option to include in my portfolio. However, unlike the travel sector, I don’t see as much upside into next year. This is because I think most of the good news regarding interest rates is now priced in to the current prices.

Overall, the stock market has some hot sectors right now that I can try to take advantage of.