I usually can’t stand it when people start thinking about Christmas in August. But I fear I might be following their lead by starting to think about investing in stocks for 2022. In my defence, the New Year is only two-and-a-bit months away, so I think I can be excused!
The big themes for 2022
Let’s say I want the amount I invest to reflect the year to come, so I’d go for £2,022! When looking to invest this amount with one eye on next year, I want to start by considering what the large issues could be going forward. From there, I can allocate my money accordingly to the best places.
I can see various issues being important in 2022. I think Covid-19 will continue to cause uncertainty. Climate change and the push towards renewable energy is likely to be high up the agenda. Interest rates will also likely be important for markets globally (not just in the UK). Finally, I think China will continue to be a cause of volatility for stocks depending on its government’s actions and the state of the economy.
Now that I’ve established the four points I think are important, I can think about the sectors that could be beneficial to invest in with my £2,022. For the sake of diversification, I’d split up my money into four chunks of £505.
Investing in stocks to fit the themes
The first point to consider is the push towards cleaner energy. Renewable energy stocks are understandably becoming increasingly popular with ESG investors. I recently wrote about renewable energy stocks in more detail here. It’s a broad industry but I think there are plenty of options to look at. Investing some of my money in this area should be profitable as more funds are focused on it.
Investing with Covid-19 in mind is more difficult. I don’t know exactly what issues the virus could throw up in coming months and years. Even though we could be in for a tough winter in the UK, it does appear that economies around the world are getting to grips with it.
Therefore, I’d invest in stocks that could benefit from the world getting back to normal. This would include retailers and travel companies.
Rising interest rates are projected for both the UK and US next year. Traditionally, this would be negative for the stock market in general. Yet there are pockets within the market that it still makes sense to invest in. For example, banks benefit from higher interest rates. This is because the margin they make between lending and borrowing money increases. As a result, I’d look to invest a portion of my money in top banks.
Finally, I need to think about China. For this point, I’d simply look to invest in stocks that don’t have a large exposure to China. For example, I’d steer clear of manufacturers that heavily rely on products or materials from there. I don’t know exactly how the situation with China will unfold next year, but I don’t want to have a lot of exposure.
Bringing it all together
Overall, I’d look to pick a couple of stocks from each of the above sectors mentioned. I’d then hope to have a portfolio of stocks that I think could not only see me through next year, but perform strongly longer term.
