Why this could be the best year for stock market investors in a decade

What makes a year a good one for stock market investors, and what makes it bad? It’s not what a lot of the headline writers seem to think.

So many financial headlines go overboard at times like these, don’t they? I’ve just seen one talking about the “worst year for stock market investors in a decade.”

I see no chance of 2022 being anything like the worst year for us. Not even a bad year, in fact. If anything, I’m wondering whether it might turn out to be the best year we’ve had in a while.

Most investors are still buying shares. And many still have decades ahead of them. So, if the things they are buying, and hope to buy lots more of in the coming years, are getting cheaper… that’s a good thing, right?

Rising costs are good?

Now that energy prices are soaring, does that make it a great year for people who want to keep warm? Of course not. And rising food prices are definitely not good for people who are attached to the idea of keeping their bellies full.

If we want to buy food, and prices rise, that’s bad. But if we want to buy shares, and prices fall, that’s bad? It does seem to be what the financial pundits think.

No doubt these same headline writers would say 2020 was a terrible year for stock market investors. It was, after all, when Covid-19 hit and sent share prices plummeting. But I bought some high-quality shares that year at extra-cheap prices.

Bargain buys

Lloyds Banking Group shares are down 8% over the past 12 months, at 43p. But investors who bought at 25p in 2020 are now up 72%. BAE Systems shares could be had for under 400p in 2020. But they’ve gained 41% in the past year and cost 760p today.

WPP is down 16% in 12 months, and has fallen 26% so far in 2022, to 823p. It’s a company that could suffer during an economic downturn, as marketing spend is reined in. But investors who bought for less than 500p in 2020 are in the money.

The sharp decline clearly made 2020 a great year for investors who bought those three, and many other shares.

Stock market trends

Bull markets tend to last around five years on average, while the average bear market seems to last around a year. I’ve been through a few bear markets in my time. But when I check a long-term stock market chart, they’re hard to see now.

Instead, there’s a general upwards trend, with the occasional wobble. And the wobbles look ever smaller the further back I check. But those wobbles were always great times to buy shares.

Best year?

So will 2022 turn out to be the best year for stock market investors in a decade? The NASDAQ and S&P 500 are both officially into bear market territory, having dipped more than 20%. So for people who buy stocks in those indexes, I think maybe it already is.

Here in the UK, with the FTSE 100 hardly moved, I reckon the chances are less so. But any weakness in the second half of the year might just make it the second best year after 2020. Fingers crossed.

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.

Alan Oscroft has positions in Lloyds Banking Group. The Motley Fool UK has recommended 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

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

With a spare £500 I’d buy these UK shares

A financial services giant, a FTSE 250 distributor, a FTSE 100 tech stock, and a gold miner are on the…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Should I buy this defensive FTSE 100 stock for growth and returns?

This Fool takes a closer look at a FTSE 100 stock to see if it could boost his holdings via…

Read more »

Young female analyst working at her desk in the office
Investing Articles

I robbed Mr Market of this cheap FTSE stock!

This FTSE 250 stock has crashed by almost 30% in six months. But I recently bought into this battered business…

Read more »

Mature people enjoying time together during road trip
Investing Articles

3 reasons I’m backing NIO shares to soar!

NIO shares have bounced up and down this year. But where will the share price go next? My bet is…

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

Up 300%, is the Hurricane Energy share price an opportunity too good to miss?

This Fool looks at why the Hurricane Energy share price has soared in the past 12 months. Should he buy…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

The BT share price crashes 20% in a month. Buy now?

The BT share price has crashed by almost a fifth since coming close to £2 on 12 July. After this…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

How I’d invest £1,000 in growth shares today to target £5,000 in a decade

Our writer reckons he could do well by choosing the right growth shares today and holding them in his portfolio…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

How passive income from stocks can speed up early retirement

By investing patiently over the years, buying quality shares has given me enough passive income to retire 10 or even…

Read more »