What does 2022 have for stock markets?

What does 2022 have for stock markets?

2023-02-07 • Updated

2021 was a year of surprises for the stock market, especially in the US. It went against all expectations. Everyone was waiting for the stocks to drop, only to see them make record historical highs over and over, and vice versa.

It won't be much different in 2022. So now let's see what will affect stock movements next year

1. Inflation and rate hike expectations

The markets understood the lesson of higher prices from first sight during 2021. As a result, companies have chosen to pass the higher costs (transportation, materials, labor, and wages) to eager consumers who want to spend what they saved during the pandemic year 2020. As a result, companies earned high profits during 2021, thanks to high inflation.

But the higher prices of goods and services to consumers, the lower the demand, resulting in weaker companies profits. When this happens, the stock markets won't be happy.

If inflationary pressures persist or increase in the first half of 2022, things could become problematic. Stocks are a good hedge against inflation up to a certain degree if it rises between 3% to 5%. However, if price growth continues above 4%, this would undermine profits and hurt stocks.

Also, hotter inflation will push central banks to tighten monetary policy and raise interest rates, thus draining liquidity and withdrawing it from the markets. Federal Reserve Chairman Jerome Powell has already stated that they may raise rates three times during 2022.

However, JPMorgan expects the S&P 500 to jump above 5,000 in the first half of 2022, representing a potential 6% rise from current levels.

2. China and its strict regulatory procedures

Beijing has taken extreme measures to curb the profits of Chinese tech giants and educational companies this year and imposed restrictions on lending to real estate developers to reduce its dependence on the sector.

Offshore Chinese stocks in Hong Kong are among the worst performers in the world in 2021. The MSCI China index is near its lowest level against global stocks since 2006.

Many of the factors that crushed Chinese financial markets will continue with us in 2022. Investors are still afraid of the Communist Party's unexpected policies, with expectations of continued crackdowns on the tech sector, after Beijing asked Didi Global to delist from the New York Stock Exchange in the United States.

In addition, the ongoing trade war, the growing division between Beijing and Washington, and the mutual banning of Chinese and American technology companies by both sides. Finally, let's not forget the Chinese real estate and housing sector crisis.

These obstacles will affect corporate profits and hurt the US and Chinese stocks hard, especially in the tech sector.

3. COVID-19 developments

Pandemic developments have been the main driver of the market for nearly two years, causing the markets to crash in 2020, then launch a historic rally on the back of vaccination campaigns that allowed economies to reopen in 2021.

With the discovery of the Delta and Omicron variants, the markets witnessed chaotic volatility in global stock indices.

Most analysts expect the virus to become a side effect in the coming year as markets and people adjust to living with it.

4. Black Swan events

The year 2022 is full of events that we might call "black swan events," sudden events with unexpected impact on the markets as they are hard to predict.

Among these events: the US midterm elections, the French presidential election, the tensions in Taiwan, the crushing crisis in the Turkish economy after the historic fall of the lira, and the persistence of supply chain bottlenecks.

Global warming and the transition to clean energy are other things that traders may need to consider. In addition, high carbon prices and environmental taxes on companies that produce harmful emissions will increase production costs for industries, which may negatively affect the profits of some companies and stocks.

Finally, do not forget that high valuations of stocks create fragile markets, easily affected by the slightest events. This is what we witness in the stock markets. The value of some shares has become exaggerated and does not reflect their fair value. It's like forming a new bubble, which may explode because of the reasons mentioned above. So, what will happen if more than one reason comes together? Or will the stocks continue to go against the trend?

Similar

Top Stocks to Trade this Earnings Season
Top Stocks to Trade this Earnings Season

The S&P 500 had a good week due to the impressive start of Q1 earnings and favorable inflation data. In March, the consumer price index rose 5%, lower than the previous month's 6%, and met economists' expectations.

Top Stocks to Invest in 2023
Top Stocks to Invest in 2023

The previous year 2022, was undoubtedly tumultuous for the stock markets, with several stocks plummeting across multiple industries. Analysts have blamed the hard times on inflation, hawkish federal reserve policies, an impending global recession, and the ongoing crisis in Ukraine. This year, however, we're beginning to see some recovery in the stock markets. This article will find a few stocks worth buying this year.

MSFT faces gloomy forecasts ahead of earnings report
MSFT faces gloomy forecasts ahead of earnings report

In a call scheduled for January 25, 00:30 am GMT+2, Microsoft will publish the company's earnings for the final quarter of 2022 and comment on the results, projections, and outlook for the nearest future of the company.

Latest news

Gold and the Majors ahead of the NFP
Gold and the Majors ahead of the NFP

Let's dive into the latest developments shaping the global economic landscape. Good news first: the threat of an unprecedented US debt crisis has receded, as US lawmakers passed a bill to raise the debt ceiling and avoid a catastrophic default. Phew! But don't pop the champagne just yet, because storm clouds are still looming. High inflation, rising interest rates, and sluggish growth are challenges that have yet to disappear.

The Oil Market in the Month of June
The Oil Market in the Month of June

Thanks to the incredible advancements in horizontal drilling and fracking technology, the United States has experienced a mind-blowing shale revolution. They've become the heavyweight champion of crude oil production, leaving Saudi Arabia and Russia in the dust. They even turned the tables and became net exporters of refined petroleum products in 2011.

Gold’s Next Move Could Be Huge!
Gold’s Next Move Could Be Huge!

Let's dive into the world of gold. Currently, the price of gold, represented by XAUUSD, is stuck in indecision, hovering around the $1,975 mark. The market is anxiously awaiting two important factors: the release of the Federal Reserve's meeting minutes and the extension of the US debt ceiling.

Deposit with your local payment systems

Feel the Team Spirit

Data collection notice

FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.

Callback

A manager will call you shortly.

Change number

Your request is accepted.

A manager will call you shortly.

Next callback request for this phone number
will be available in

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later

Don’t waste your time – keep track of how NFP affects the US dollar and profit!

Beginner Forex book

Beginner Forex book will guide you through the world of trading.

Beginner Forex book

The most important things to start trading
Enter your e-mail, and we will send you a free Beginner Forex book

Thank you!

We've emailed a special link to your e-mail.
Click the link to confirm your address and get Beginner Forex book for free.

You are using an older version of your browser.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Safari Chrome Firefox Opera