Stock market predictions for 2022

advertisement

Here are a few predictions for 2022 that have a good possibility of coming true.

1. Value stocks are finally going to have their moment.

During the past ten years, growth companies have outperformed value equities in terms of total returns by roughly two to one. Since then, growth has consistently outperformed in any one year. However, I believe that the tendency will reverse in 2022.

There are a couple of reasons. Interest rates are expected to rise in the near future, which can negatively impact growth stocks. As COVID 19 (hopefully) comes to an end, reopening stocks fit into the value category, which means they have the potential to be major winners. Finally, growth values have been running a little high in past years, and I believe they are ready for a downturn, particularly in an inflationary climate.

2. The Fed will soon raise interest rates, but inflation will stay

According to current forecasts, the Federal Reserve will either raise rates once or not raise them at all in 2022. On the other hand, I believe that rates will be raised twice. Our expectations of a short-lived rise in inflation have been greatly exaggerated as we approach 2022. Members of the Federal Open Market Committee predict inflation to average 2.2% in 2022, but you shouldn't be surprised if it reaches 3% or higher.

3. This year's double-digit growth in the housing market will continue into 2022.

A year-over-year increase of 18.5% was recorded in the 3rd quarter of 2021 in U.S. home prices. And in certain regions, the benefits were considerably more pronounced. While some analysts believe that the surge in housing prices will slow down, I'm not so convinced. As a matter of fact, I think we will see double-digit growth in 2022.

Overwhelmingly, price increases could be triggered by a variety of factors. There are a number of reasons for this, including the fact that the conforming mortgage maximum is expected to rise by nearly $100,000 next year. Building more homes is becoming increasingly difficult due to materials and skilled labor shortages. Rates on home loans also remain at historically low levels, with little evidence that this trend will change any time soon.

4. SPACs will reappear.

Special purpose acquisition (SPAC) activity is expected to pick up again by 2022. This IPO alternative is far from dead, but I doubt we'll see as many new blank-check companies come to market every week as we saw in early 2021. About $150 billion in money is available to 549 SPACs, and many creative growing companies want to go public.

5. Cryptocurrencies are in for a difficult year.

As of 2020 and 2021, several digital assets have reached or are nearing all-time highs. There has been a 690 percent increase in Bitcoin and a 3,450 percent increase in Ethereum since the start of 2019. In 2022, institutional and investor interest in cryptocurrencies is expected to wane, and Bitcoin and Ethereum prices will fall by at least 20%.

All rights reserved 2021