The year 2022 has been shaken up by global inflation and rising gas prices. With that being said, there are other forces at play that are bound to have an effect on people’s financial decisions.
Today, we will discuss 5 factors and trends that could move the share trading needle in 2022:
1. Inflation
To curb the spread of the pandemic, countless restrictions were put in place, the end result of which manifested as supply chain bottlenecks that ultimately drove up the prices and put everything to a standstill.
To save businesses from going bankrupt, the government started printing money like no tomorrow, ensuring they would be able to pay off their expenses.
With the estimated 10-15% of inflation, the fiat currency is losing value at a critical pace. What was being touted as “transitory” in the previous year, very much turned out to be a lasting consequence of the recent year’s health crisis.
Without a shred of doubt, the pressure is on for people to start thinking of ways to protect the value of their assets, meaning they are likely to make some sort of investments (whichever they believe to be the most fitting).
To cast the world down the spiral of inflation even further, the Ukraine war is a major contributing force, as if the pandemic-related crisis wasn’t enough.
What started with rising car and technology prices slowly added food, gas, and air travel prices on top of it all, stockpiling crisis upon crisis. To combat inflation, the Federal Reserve started increasing the interest rates which led to an increase in lending costs.
If inflation keeps eating away at our wealth, keeping money in the bank would be unwise.
Therefore, it’s very likely that people will start looking at ways to protect the value of their capital by investing in other kinds of assets whether it be gold, shares, cryptocurrencies, real estate, or anything that isn’t fiat currency.
2. Energy
The events surrounding the Russian invasion of Ukraine led to an energy crisis in Europe, the effects of which are likely to intensify during the colder months unless an alternative solution is found.
With Russia being in direct control of the gas supply and Europe being very much reliant on it, the situation is quite pressing indeed.
These events once again reminded us that more focus needs to be put into utilizing renewable energy sources, not only for the sake of remaining independent from gas oligarchs but to preserve Mother Earth as well.
With some degree of reliability, we can expect capital to be pouring into energy stocks.
3. Gold
When the crypto markets are crashing and the fiat currency is rapidly losing value, people will start looking for ways not necessarily to make a profit with their investments, but to preserve the value of what they have.
Gold has traditionally been the go-to choice in this regard, although cryptocurrencies have also played a similar role in recent years.
No matter how you put it, gold has been around since the dawn of time, whereas crypto is a relative newcomer.
As ThinkMarkets evaluates the current situation in financial markets, it wouldn’t be out of the ordinary to see more capital being poured into this tried and tested investment.
At the end of the day, we can create an infinite amount of cryptocurrencies of all shapes, sizes, and brandings, but gold is a finite resource no one can produce more of.
Therefore, when other investments are off the table due to being regarded as unstable as the markets are undergoing massive shifts, it’s likely that traders and investors will start flocking back to what has traditionally worked as some of the most reliable and stable investments of all – gold.
This is particularly likely to be the case if the global economy remains at a standstill for a long, which is when we can expect people to start selling their company shares and reinvesting their money into something else such as gold.
4. Lower purchasing power
The rising food and gas prices, inflation, tax increases, and similar forces create a heavy burden on the average consumer’s purchasing power. Since it’s not reasonable to expect a pay raise in most industries, most people will have to come to terms with the fact their purchasing power will be low, at least in 2022.
The only exception to the norm is the logistics and entertainment industry where wages seem to be on the increase.
For those unhappy with their current financial standing, there is always the option of transitioning to these industries if they’re prepared to learn something new. But no matter how we put it, the vast majority of people will feel a financial hit.
All in all, having a lower purchasing power has never been good for the economy as a whole, and may have a lasting effect on our economy in the years to come.
In terms of share trading, lower purchasing power can affect the market in multiple ways. While some will undoubtedly sell their shares just to be able to cover their day-to-day costs, others will look for ways to reinvest their capital to protect it from losing value.
5. Technology
Historically speaking, technology has often proved itself as a winning investment.
However, it’s also ripe for speculation, as it can be quite hard to tell what kind of technology will end up dramatically altering the way we live our lives and what technological creations will ultimately fade into obscurity due to no one being interested in using them.
In 2022, be on the lookout for rising technological trends such as 5G, blockchain, robots, drones, virtual reality, and similar.
Self-driving vehicles have shown themselves to be another major force to be reckoned with, but due to the still unresolved safety concerns, it may take a couple of years until the technology becomes polished enough for people to accept it.
Delivery drones, on the other hand, have proven to be a reliable and successful means of delivering food, medical supplies, and other equipment. Welcome to the future of drone delivery!
Conclusion
A good trader is no stranger to taking calculated risks.
The ongoing trends can help provide a somewhat stable and reliable basis for making your trading and investing decisions, but in the end, you need to be comfortable with taking on some risk if you wish to turn a profit.