3 reasons why there could be a stock market boom in 2022

The FTSE 100 index might be getting weaker right now, but Manika Premsingh believes that there are still three reasons to expect a stock market boom in 2022. 

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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I know the title of this article sounds strange right now. After all, the stock markets could be just shy of a complete meltdown right now. As I write, the FTSE 100 index is holding above the 7,000 levels by a thread. It could tumble below anytime now, as news about the omicron variant gets worse. But I am still holding out hope for three reasons. 

#1. Omicron’s impact might be controlled fast

First, we do not know the extent to which we will be affected by the variant yet. Will it be as bad as the first wave of the coronavirus? Or will we be protected by vaccines? While we may not have the answers yet, so far it appears that we are far better prepared to deal with it than we were right at the start of the pandemic. 

New restrictions have been put in place, and booster vaccines are expected to be administered soon. In other words, I expect that we have a far better chance of getting this variant under control than we did back in early 2020. And I think the recovery could be swift from here, putting us right back in a stock market boom as we head into 2022. 

#2. The bounce back could result in a stock market boom

Second, we now have very recent experience of what happens once the coronavirus comes under control. In the past year, we have seen a huge turnaround in stock market fortunes. The FTSE 100 index has risen more than 17% between last November and now. Before news of the variant came in, the index was almost back to pre-pandemic levels. In fact, I had even written an article speculating about whether it can rise to 7,500 by the end of the year. 

And I think that if the variant fears are abated soon enough, there is still hope. For November up to yesterday’s close, the index is still up by 1.6% from the month before. This is the fastest month-on-month growth in the past six months. If the variant gets controlled, the bounce back could be strong. In fact, I believe that we might still look back at 2021 as one of a booming market, that spills over into the next year.  

#3. Limited economic impact

Third, the real economic impact of the variant is probably quite small so far. As yet, only travel would have taken a hit from the latest developments. All other segments that could be impacted by the coronavirus, from non-essential retailers to banks have been untouched. And even if another lockdown were to happen, I reckon businesses are better prepared for online operation than they were during the first lockdown. So, I would expect more positive than negative news from FTSE 100 companies in the coming days and months that could buoy the markets in 2022 as well. 

My takeaway

Of course it is entirely possible that the latest strain of virus turns out to be a challenging one to control, and the recovery suffers a setback. But, for now I think it would be premature to believe that. The way I see it, there is a still a strong likelihood of ending the year and beginning 2022 on a high note. With that mindset, I am buying stocks that have long been on my wish-list but were too pricey. 

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 assessed. Consider taking independent financial advice.

Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »