How I’d prepare for a potential stock market crash in 2022

Rupert Hargreaves explains why he thinks a stock market crash is coming in 2022 and what he is doing about this risk today.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Businessman touching on number 2022 for preparation

Image source: Getty Images

I think the conditions are ripe for a stock market crash in 2022.

I do not make this statement lightly. Many investors, myself included, could end up losing a lot of money in a market downturn (at least temporarily).

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

However, it seems to me that uncertainty is growing around the world, and this could lead to a market sell-off. 

Stock market crash risks 

There are a couple of reasons why the market might start to become skittish in 2022. 

Last year, central banks unleashed a tidal wave of cash into the financial markets to blunt the pandemic’s impact on the global economy. This strategy worked, but some analysts have become concerned markets are now hooked on cheap money. 

As central banks start to withdraw their support, this could lead to volatility. Higher interest rates may lead to lower equity valuations, and a drop in money printing may lead some investors to reduce exposure to risky assets, like equities. 

Another challenge the market will have to overcome is rising inflation and the supply chain crisis. These factors are pushing up costs for companies, which may ultimately hurt profit margins and profitability. Lower corporate profits could lead to lower share prices. 

As well as the above, the threat of the pandemic is still rumbling on in the background. 

Considering all of the above, I am looking for ways to protect my portfolio in the event of a stock market crash occurring in 2022. 

Protection against uncertainty 

It will never be possible to protect my portfolio from a crash altogether. Still, there are a couple of assets I would buy to protect my wealth from uncertainty. 

The first is the age-old safe-haven, gold. I would invest in this asset through an ETF to protect my portfolio against market volatility and inflation. 

Alongside a gold ETF, I would acquire a basket of high-quality consumer goods stocks. Companies like Reckitt and Diageo own portfolios of well-known brands and have proven themselves over the past two years.

While past performance should never be used as a guide to future potential, I think Reckitt and Diageo’s global reach and strong brands should help them navigate further market and economic uncertainty. 

And I would also add some international exposure to my portfolio by acquiring Apple. This company has a devoted fan base and sells must-have products, plus services on a subscription basis, the latter providing a steady recurring income stream. 

I think these single stocks could be suitable investments to help my portfolio weather a market crash. However, their performance is not guaranteed. If consumer spending suddenly declines, these businesses may also suffer a drop in revenues. 

Diversification 

By adding an investment fund to my portfolio, I think I will be able to overcome some of the risks associated with buying single stocks.

As such, I would also add the LF Blue Whale Growth fund to my investment bucket. I am attracted to this fund as it focuses on buying global companies with high profit margins and competitive advantages. These qualities should help these businesses navigate economic uncertainty. 

The fund approach is not without its risks. If the Blue Whale fund managers pick the wrong investments, I could be exposing myself to more risk without realising it. This is something I will keep an eye on as we advance.

Inflation Is Coming: 3 Shares To Try And Hedge Against Rising Prices

Make no mistake… inflation is coming.

Some people are running scared, but there’s one thing we believe we should avoid doing at all costs when inflation hits… and that’s doing nothing.

Money that just sits in the bank can often lose value each and every year. But to savvy savers and investors, where to consider putting their money is the million-dollar question.

That’s why we’ve put together a brand-new special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation…

…because no matter what the economy is doing, a savvy investor will want their money working for them, inflation or not!

Best of all, we’re giving this report away completely FREE today!

Simply click here, enter your email address, and we’ll send it to you right away.

Rupert Hargreaves owns shares of Diageo and Reckitt plc. The Motley Fool UK has recommended Apple, Diageo, and Reckitt plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.

More on Investing Articles

Woman looking at a jar of pennies
Investing Articles

I think the JD Sports share price is a bargain. Here’s why

Our writer explains why the JD Sports share price has led him to buy more for his portfolio.

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Is this tech stock one of the best shares to buy now?

Jabran Khan is on the hunt for the best shares to buy now for his holdings and takes a closer…

Read more »

Business development to success and FTSE 100 250 350 growth concept.
Investing Articles

3 top FTSE 250 shares to buy right now

I think the FTSE 250 is offering some great dividend and growth shares at the moment. And there are plenty…

Read more »

Happy retired couple on a yacht
Investing Articles

This growth stock has seen its shares pull back! Should I buy now?

When a growth stock sees its share price drop, I look carefully to see if I could pick up a…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

How to identify the best income shares like this one

Income shares vary in quality but this approach keeps me from making some of the worst howlers with dividend investing.

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Investing Articles

If I’d invested £1k in Tesla shares a year ago, here’s how much I’d have now

If Jon Smith had bought Tesla shares a year ago, he'd be in profit. But he has some concerns for…

Read more »

Twenty pound notes in back pocket of jeans
Investing Articles

Should I buy tobacco shares now for big dividends?

After a possible setback for electronic cigarettes, our writer explains why he would still buy tobacco shares for his income…

Read more »

a couple embrace in front of their new home
Investing Articles

3 FTSE shares I’m buying with the Help to Build scheme!

Last week, the government launched a new, Help to Build scheme. So, here are three FTSE shares that could benefit…

Read more »