2022 Investing Considerations and Market Outlook For The Year Ahead – Stocks, Crypto, Bonds and Real Estate

As the calendar year comes to a close, investors are looking to diversify their portfolios and identify what to invest in next. With cryptocurrencies reaching historic highs, the real estate market surging, and an overall stock market pushing forward, we might just end one of the best performing years for investments in a decade.

This is great news for all investors both seasoned and fresh, and given a rapidly improving economy we may see another bull market in 2022.

Based on current market trends, the biggest winners this past year have been cryptocurrencies by far (and maybe a few notable meme stocks). With the mainstream acceptance of blockchain technologies and the historic release of the first crypto ETF—it has never been easier to invest in cryptocurrencies.

While there are many cryptocurrencies and coins being created every day, smart investors would do well to stay focused on well established and reputable cryptocurrencies such as Ethereum and Bitcoin. Speculating on thematic cryptos maybe fun, remember it is not investing and more akin to buying a lottery ticket.

Another winner this past year are energy and financial stocks. Backed by the ever-increasing price of oil, energy flourished. But so did banks and financial firms, primarily due to a hot market for corporate deal-making and an economic recovery that performed much better than anyone anticipated—namely, there were fewer bad loans than had originally been predicted at the height of the pandemic. This allowed banks to lower their loan loss reserves and boost their profits in 2022.

All in all, it has been a great year for investors. As we look forward to 2022, keep your eye out for how the world continues to grapple with the COVID pandemic. As well as how supply chains will be affected in the coming quarters with a massive backup in the United States and China increasing their grip on an already heavily regulated supply chain.

And as always, don’t forget to read up on changing monetary policies as world leaders look to diversify their economic plans from Biden’s Infrastructure Plan to El Salvador’s adoption of cryptocurrency for their entire nation.

Diving Deep Into Cryptocurrencies

Let’s start off with one of the most controversial and risky investments, but not to say it isn’t one of the most profitable ones as well. With Bitcoin surging to well over $60,000 and a market cap north of 1 trillion at the time of publishing, it’s no wonder that private investment firms are taking Bitcoin more and more seriously. But with dozens of different cryptocurrencies and an ever-changing landscape, critics caution retail investors to beware.

Research and patience are the two principles investors are going to have to utilize if they plan to win big with cryptocurrencies. There are still wins to be made for day trading investors with altcoins (alternate coins aside from Bitcoin) but the longer term profits are with the top 2 to 4 cryptocurrencies. Especially as they get used for more real life use cases. Personally, I use and recommend Coinbase for all my crypto trading.

Which is the best coin? While Bitcoin is the largest in terms of market cap, an increasing amount of faith being placed in Ethereum as it ushers in a new area for digital ownership through NFTs (non-fungible tokens) and smart contracts. However others like Solano and Cardno are also growing in popularity) as the make more transaction “efficient” coins. I.e. more transactions and lower gas fees.

My recommendation, like any new or volatile investment is to dollar cost in over time. For example I started investing in Ethereum in my Coinbase account by investing $150 p/week over the last 12 months and have slowly grown my position to over $10,000 thanks to the regular buys and gains over time.

I also think it is not a bad idea to put $100 to $200 towards some of the highly speculative coins or tokens. Think of it as a lottery ticket and you only really need one of these tokens or coins to get on a run (catch fire or go to the moon) to make some crazy returns. Dodgecoin and Shiba Inu are good examples where if you got in relatively early, you could make 1000x returns in just a few months.

Is The Equities Bull Run Over?

The bull run so many investors have been excited about is finally ending – or is it? After nearly 8 months of strong gains for the equities market, especially compared to pandemic induced lows in 2020, the U.S. stock market is finally leveling out as companies report their latest earnings. While there have been some hits and misses on earning expectations, overall the stock market continues chugging up as we end the seasonally strongest months of the year.

These numbers reflect an American population that is spending less this fall season but also that fear around the Covid-19 pandemic hasn’t completely dissipated. With uncertainty in the stock market, advisors are encouraging diversification of client portfolios, such as international equities or alternative assets like real estate, where there is lower volatility and downside protection in the case that the stock market continues to struggle in 2022.

While markets may slow in 2022, it is still critical to remain in them and invest regularly (you can use this broker to setup an automatic investing schedule for free). For most investors who don’t have the time to spend 10 to 15 hours a week on keeping up the financial news, index funds are the way to go. However if you want to pick individual stocks, stick with companies that have pricing power and a sustainable business model to deal with economic slow downs.

Commodities Continue to Surge

This may come as no surprise, but the commodities market surged in 2021 with more and more people staying at home, which has prompted a massive housing and new construction boom.

This increase of at-home workers and families has also led to an increase in energy demands, prompting the highest natural gas and coal prices since 2011.

The World Bank also expects the commodity market to average a dramatic 80 percent increase from 2021, citing climate change, higher demand for energy, and a global population that is moving away from the rural and into metropolitan areas.

However, the World Bank does predict agriculture and metals to decrease in 2022, following strong gains in 2021.

An Ever-Expanding Real Estate Market

Mortgage rates are at a record lows and affordable housing inventory was incredibly scarce in 2021, all due to a well-performing job market, an increase in savings, and interest rates that are helping the average American purchase a home. Across the nation, there is a high demand for home and refinancing has never been so attractive for millions of homeowners.

And as Millennials approach the prime of their home buying years, more and more homes are being sold. In fact this trend has led to many economists concluding that the supply of new housing will lag demand for years to come.

This upcoming 2022, you can expect a more diverse set of up-and-coming cities. Primarily led by a more remote workforce that now understands they can work from any city, no longer are finance and entertainment hubs like NYC and LA a necessity.

In fact, neither made the list for PwC’s 2022 Emerging Trends in Real Estate Report. The top five cities to keep an eye out for real estate are Nashville, Raleigh, Phoenix, Austin, and Tampa.

The Safe Bet: Bonds

Bonds, the safe haven for every investor when the stock market is having a bad season—this might just be one of those years to a second gander at bonds as the equities market closes off lower than expected.

But remember not all bonds are made the same, high-yield bonds are incredibly correlated with equities. Instead, try focusing on government-backed bonds like the Vanguard Total Bond Fund that is composed of 65% of U.S. government bonds.

The Fed is also promising to continue buying a minimum of $120 billion of Treasury bonds and mortgage-backed securities monthly for the rest of the year. Quailing any fears of inflation as just transitory and in 2022 if things continue to look up, there will be a lift of short-term rates and they will begin tapering their bond-buying program.

2022 Investing Conclusion

The world will continue to grapple with the Covid-19 pandemic, but with vaccines now a staple across the largest metropolitan areas in the world, you can expect to see a calmer population and an increase in consumer spending across the board. And as new technologies continue to spring up every day, pay special attention to the robust tech sphere and how cryptocurrencies and NFT change how we define ownership.

With all of that being said, remember that no asset class is complete without its risk and times are uncertain as a whole. The best investing consideration for 2022 will be a diverse portfolio with assets across all the major classes. As the old adage goes, “don’t pull all of your eggs in one basket.” Or in modern terms don’t invest with a YOLO (you only live once) mentality, unless you are ready to lose it all.

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