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By Suzean Haumann, Sonia du Plessis and André Basson*
Is 2022 going to be a boom or bust year for investors? Is inflation, especially in the US, going to put a drag on the post-COVID economy? Most importantly, when can we safely say we are in a post-COVID world?
These are all questions raised in discussions from the dinner table to boardroom table, and rightfully so because uncertainty over the next year is high.
We spoke to three Brenthurst Wealth advisors to get their sense of what you might expect, and how to position yourself to take advantage of global developments in 2022.
The bad news for domestic investors, Suzean says, is that the investment environment is expected to remain volatile in 2022.
Threats to your portfolio are bountiful, with local factors from Eskom’s loadshedding a constant spanner in the works that hampers economic activity, and therefore growth. Abroad, the global economy needs to find a way to combat or reverse rising inflation, with short-term relief increasingly unlikely.
“I still believe in a well-diversified portfolio that focuses on a client’s risk profile and their goals for the investment. Whether you are looking for income, capital growth or capital preservation will determine how we structure your portfolio,” Suzean says. “Active management in portfolios is very important to ensure that your portfolio is optimally structured and that we can help you brave any stormy waters.”
Sonia du Plessis
Sonia agrees with Suzean that we can expect to see markets do what they do.
“It will be volatile, irrational and unpredictable, but that also means there will be growth possibilities and plenty of buying opportunities. Investors who can ride out the volatility, stay the course and ignore all the market noise will be rewarded for their patience,” she says.
One of the major drivers of markets next year will be how the US Federal Reserve tapers support for the economy and raises interest rates to curb inflation. With year-on-year price growth in recent quarters surprising on the high side, the US Fed has indicated it will act to try bring inflation under control.
Sonia says some positive news that we are all looking forward to hopefully hearing next year is the end of the COVID pandemic.
“The day we reach that stage, sentiment in markets will turn positive and tick up again. Just keep in mind, markets are forward-looking and if you have money sitting on the side, it makes sense to climb in early and not wait until after markets have started to correct.”
If you are looking for one watchword to guide your investment decisions in 2022, Sonia suggests that should be diversification. And do so across asset classes, and sectors of markets, she suggests.
In casting his eye toward the year ahead, Andre has singled out sectors, themes and stocks that could offer decent returns based on circumstances expected to dominate 2022. These circumstances, he suggests, will be driven by consumer lifestyle changes of which many have been accelerated by COVID-19.
The first of these is the food sector – both producers like Nestle and Procter & Gamble, as well as Hellofresh, the German listed group the makes meal kit now sold across the US and Europe. Another sector that will benefit is the fitness gear and clothing brands like Nike and Adidas who are expected to ride the pandemic-inspired fitness boom.
Similarly, the beauty industry has shown through the pandemic that there is still strong demand for its products. Even though public events may be curbed, the need to look your best remains on online video calls. The likes of L’Oréal and Estée Lauder should therefore be on your radar in 2022, André says.
Continuing the technology theme, which is a perennial one given how it dominates every aspect of our lives, Andre says the semiconductor industry holds some interesting growth prospects. Manufacturers like ASML, TSMC and Nvidia are all poised to benefit from the immediate as well as ongoing demand for their components.
Social media companies ranging from Meta (Facebook, Instagram, WhatsApp) to Amazon, Shopify, and Spotify will all continue to attract users and advertisers as our daily activities are further digitised.
With this shift to a more digital and digitised world, themes ranging from cybersecurity to robotics and crypto will grow in size and importance.
His last suggestion to South African investors looking for a solid, dependable play should look no further than Warren Buffet’s Berkshire Hathaway.
“If you want something that will provide you a bit of safety and hedge against inflation, this might not be a bad pick,” he says.