Going into the new year, you may wonder what you should invest in: artificial intelligence, cyclical stocks, health care? A combination of these or something else entirely?
It’s a great question. Based on the unique events from last year, rising interest rates and consumer pushes toward specific sectors, you want to sink your money into the right investment types.
Let’s walk through a few options — though it’s not an exhaustive list. In this article, we’ll discuss cyclical stocks, cybersecurity, artificial intelligence (AI), augmented reality, health care technology, the financial industry and energy.
Some stocks are impervious to recessions and economic slowdowns (think of these as defensive sectors).
However, you may want to consider investing in cyclical stocks in 2022 due to their ability to follow the ups and downs of the economy. Cyclical stocks make or sell discretionary items and services and perform well when the economy does well. When the economy does poorly, cyclical stocks do as well.
Here are a few examples of cyclical stocks’ underlying companies:
- Auto manufacturers
- Hotel and travel
- Furniture retailers
- Clothing stores
- Luxury goods manufacturers
Cyclical sectors will likely outperform more defensive sectors to start 2022, so take advantage of above-potential growth in this sector.
Cybersecurity stocks rose faster compared to S&P 500 stocks, possibly related to increasing interest in cybersecurity following the heights of the pandemic. Investors put cyber and information security at the top of their lists for their go-to investments in 2022, according to a Gartner survey. The survey said that 66% of all respondents expect to increase their investments with this particular area. Respondents said they’d also invest in business intelligence/data analytics (51%) and cloud platforms (48%).
Despite supply chain disruption in 2021, investing in supply chain automation initiatives, software and talent could become a worthy investment in 2022. Emerging digital technologies and independent software vendors (ISV) may help manage operations to become more responsive through the use of automation through artificial intelligence software.
Supply chains may benefit from managing trade controls and more internal resources put toward supply chains, omnichannel shopping and quick fulfilment and an increased understanding of customer trends and new distribution models.
Everyone knows the pandemic allowed online shopping to flourish. Future growth should continue to build through ecommerce in 2022, according to Adobe. In fact, Adobe expects 2022 to rise to the first trillion-dollar year for ecommerce. It’s worth considering that shoppers will continue to utilize the buy-online-pickup-in-store (or curbside) options, which grew 67% year over year in February 2021. Of U.S. consumers, 30% of online consumers prefer curbside or in-store pickup over standard delivery options, according to Adobe.
A Gartner survey found that one-third of technology and service provider organizations will invest in artificial intelligence (AI) — they will invest $1 million or more — within the next two years.
What is AI, by the way? AI refers to the use of algorithms and statistical models to perform tasks without direct instructions. It combines machine and deep learning to uncover patterns and correlations.
Survey respondents (87%) in the Gartner survey believe that AI technologies will serve as a beacon for investors through 2022.
Augmented Reality and Virtual Reality
Is augmented reality the same as AI? No.
AR combines real and digital environments. In other words, computer-generated objects interact with the real world. (Think of the media platform Snapchat with its added-in AR filters.) Many investors consider virtual reality (VR) and augmented reality (AR) as having untapped potential in the tech sector.
Virtual reality, on the other hand, completely sinks users into digital worlds. Both could completely change the way we go about daily tasks, the way we work and even how we interact with our surroundings.
Health Care Technology
Watch health care consumerism and the digitization of health care in 2022. Investors continue to take a look at virtual health investment opportunities, which means investing in technologies that empower and connect health consumers to help them manage their own health using high-tech diagnostic tools and other technologies.
Innovators and investors believe that health care in the post-pandemic era can see tremendous digital change.
As the Fed gets set to raise rates in response to high inflation (learn more with this article: Federal Reserve has indicated that it will impose rate hikes and taper its bond buying program next year).
Based on this news, you may want to consider investing in the financial industry. As the economy grows stronger, people and businesses will continue to feel more comfortable purchasing a house or building onto their businesses. Banks and credit unions, as well as the underlying businesses that serve these institutions will also benefit from these rate hikes. Companies may also help financial institutions because they may be more likely to issue their IPOs or go through mergers and acquisitions.
During the pandemic, crude oil prices crashed to all-time lows because nobody got on an airplane, drove their cars or went on vacation. Crude oil and gasoline dropped, but since then, the energy sector has come zipping back.
JPMorgan analysts believe energy will continue to mount a successful campaign in 2022 due to healthy commodity prices and capital return plans. The price of oil should continue to see upward pressure, as should other segments in the energy market.
How Will You Invest in 2022?
So, how will you choose to invest in 2022?
And finally, how do you feel about cryptocurrencies? While you may not want to stuff all your money into the blockchain technology, you may want to consider learning more about them and how they work. Remember, however, that cryptocurrency is new, highly unregulated and proves to be a risky investment.
As you consider companies that you believe will achieve success no matter what trends continue to pop up in 2022, remember to never invest in more than you can afford to lose, no matter “how promising” your own research or your neighbor has claimed they are.