The pandemic is still with us and necessitates a change in our investment strategy, if not a complete mindset shift. Even though specific sectors underperformed due to the pandemic, technology stocks, mainly software names, rose due to the pandemic, delivering spectacular returns for investors who focused on areas like e-commerce and companies that provide work-from-home solutions.
Following a fantastic performance in 2021, where we saw the S&P BSE Sensex and the Nifty50 gain 20% and 22%, respectively, global stock markets, including India, are preparing to enter 2022 cautiously.
The following are seven trends that will have an impact on equity trading in 2022:
The governments handling the rapidly growing inflation will be perhaps the biggest concern for the equity market in 2022. Wage rises are anticipated due to the COVID-19 disruption, which will cut into consumer and business discretionary money. They have the potential to delay the economic recovery from the coronavirus-induced recession, which directly impacts the stock market.
New COVID Variants
The various COVID-19 strains are another clear risk to global markets. The appearance of the delta version of the SARS-CoV-2 virus sent investors fleeing for cover. Because SARS-CoV-2 is mutable, we should anticipate new variants to emerge in the following year, which will significantly impact equity trading.
Rise of Cryptocurrencies
From $141 billion to $2.34 trillion, the total value of digital currencies has increased by more than 15 times. It`s been simple to make money in the cryptocurrency sector — possibly a bit too simple. The crypto market is projected to dominate in the future, resulting in a large reversal in stock market capitalization. In that event, retail capital investors who have been hopping between digital currencies and stock trading may change to crypto investment.
Corporate Profits Growing at a Slower Pace
Another concern is increasing supply chain disruptions when major global economies implement lockdowns and movement restrictions to combat the spread of Covid-19. This aspect influenced the profitability of several businesses in the second half of 2021.
While most experts agree that the path ahead for stocks as an asset class will be rocky due to challenges, they anticipate that total market returns in 2022 will reflect corporate profits growth.
Markets with growing COVID-19 cases and a higher incidence of the Omicron variant may underperform. Expect sector rotation to continue, with defenses such as pharma, IT, and the consumer making a return until confidence improves.
According to Morgan Stanley, policymakers in Asia will only be able to gradually normalize policy, depending on the speed of recovery, inflation dynamics, and the implications of the Omicron variant.
If and when 10-year real rates in the United States climb considerably in a short period, there is a possibility that financial conditions in Asia may become volatile, though the effect would be less severe than in 2013. If this risk scenario comes true, India and Indonesia would be the most vulnerable economies.
In the year 2020, sustainable investment had an enormous boom. The Covid-19 pandemic served as a stimulus for investment in environmental, social, and governance (ESG) issues. According to a Morningstar analysis, the asset class has had record inflows of $21.5 billion in the United States alone, and this trend is expected to continue in 2022.
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