3 trends I believe could impact stock markets in 2022

2021 was a year when macros dominated stock market performance, according to Manika Premsingh. Will the pattern repeat 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.

There is no denying the impact that macro trends and events have on stock markets. We have seen that in the last two years. One of the biggest examples of this is the fiscal stimulus of recent times. In a bid to battle the impact of lockdowns, governments around the world supported business in various ways, including by pumping money into the economic system. This resulted in a global rise in commodity prices and closer to home, in a property market rally. As these fiscal stimuli are being withdrawn, we are already witnessing softening in these sectors. And in 2022, I expect three such big trends to impact the stock markets. 

Inflation will remain high

Perhaps the most obvious of these is inflation. Price rises have been accelerating through the year. As lockdowns were eased, there was sidden, higher demand for products and services. And the mismatch with supply increased prices. Along with this, oil prices have also been on a tear. And since these are inescapable costs, a lot of listed companies have talked about cost increases when releasing their results. The trend is expected to continue in 2022 as well. And that means it could be a drag on broader stock markets next year. But I bought oil producers’ stocks like BP and Royal Dutch Shell to counteract the impact of inflation on my portfolio. And I intend to continue holding them through next year.

Interest rates to rise

As a result of rising inflation, interest rates are also expected to continue heading upwards. In fact, they have started rising already. The Bank of England recently reacted to a spike in inflation by increasing its interest rate by 0.15 percentage points to 0.25%. Commercial banks could follow suit. This would be bad news for indebted companies, of which there are many (big and small) in the post-pandemic environment, as it means their debt-servicing costs will rise. But it is also a positive for segments like banking. The banks have suffered quite a bit during the pandemic. My picks among the major FTSE 100 names include Lloyds Bank and HSBC, which are on my investing wishlist for 2022. 

Slow recovery could impact stock markets

Last but not least, is the impact of these trends on the global recovery. The economic recovery has already been quite slow in 2021. And to that if I add continued pandemic-related concerns, high inflation and rising interest rates, I think it is fair to expect that the recovery may not exactly be a boom. In fact, it could continue to be tepid. And that to me is a sign to consider defensives closely like healthcare and pharmaceutical companies. I have been a happy investor in AstraZeneca for instance and recently even increased my holding. 

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 owns AstraZeneca, BP, and Royal Dutch Shell B. The Motley Fool UK has recommended HSBC Holdings and Lloyds Banking Group. 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

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 »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

2 FTSE income stocks investors should consider buying in April

Income stocks are a great way to build wealth. Our writer details two picks she believes investors should consider snapping…

Read more »