After several years of excessive returns in the stock market, investors might hope 2022 to look similar to previous years.
While future performance is impossible to anticipate with absolute assurance, many financial consultants still expect reasonable returns.
President and chief wealth strategist for Anderson Financial Strategies in Dayton, Shon Anderson, told clients to expect a flat year in the stock market. He explained that the year might come with high inflation, slower economic growth, and interest rate hikes.
This year, the S&P 500 Index showed a total return of approximately 29.3%. That’s 18.5% in 2020 and roughly 31.6% in 2019, and a loss of over 5% in 2018. Over time, the annual average is approximately 11%.
The Dow Jones Industrial Average has a total return of 21.2% this year. It had 9.73% in 2020, 25.3% in 2019, and a loss of 5.7% in 2018. In the meantime, the tech-laden Nasdaq Composite index posted a 23.4% gain this year. It had 44.8% in 2020, about 36.8% in 2019, and 2.85% in 2018.
While 2022 might end with single-digit gains, perhaps the economy is expected to continue to grow but at a slower pace. According to the Bureau of Labor Statistics, the gross domestic product increased at an annual rate of 2.4% in the third quarter. That came after 6.6% annual growth in the second quarter and 6.5% in the first quarter.
With slower growth, persisting inflation, and the Fed’s interest rate hikes for the next year, there might be specific industries that can outperform others.
An investment analyst with Briaud Financial Advisors in College Station, CFP Matthew McKay, said that the environment seems risky. He said that people should be more cautious and defensive, but there are still some opportunities to make money.
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