Bewildered investors in Catch-2022 situation

THE LAST 12 months were bumpy for the economy but 2021 was surprisingly good for investors, with global share prices flying.that spelled good news for millions with pensions and stocks and shares Isas, but it was another disastrous year for cash savers, while safe havens bonds and gold also struggled.

So who will be the winners and losers in 2022?

SHARES

The FTSE shrugged off Brexit fears to climb around 12 per cent in 2021, although the US stock market did even better, with the benchmark S&P 500 index rising more than 25 per cent. Global shares have soared for three years in a row, despite the chaos caused by the pandemic, but this remains a phoney bull run.

Central bankers and politicians have pumped out trillions of dollarsworth of fiscal and monetary stimulus, and that is what has been pushing up share prices.

Record low interest rates have helped too, but all these trends may now be going into reverse.

Central bankers will have to hike rates and cut stimulus to stop the economy from overheating, while Chancellor Rishi Sunak will be hiking taxes to pay for his Covid bailouts, which will hit consumer spending and business growth.

Bestinvest managing director Jason Hollands said the Omicron variant casts a shadow of uncertainty while “rising inflation and borrowing costs are also major concerns”.

He said many investors have overlooked the UK and tips three funds for stocks and shares Isa investors: Artemis UK Select, Fidelity Special Situations and Jupiter UK Special Situations. Outlook: If Omicron eases and lockdowns are scrapped, stock markets could perform strongly again in 2022. Unless inflation rages out of control.

CASH

Savers will not need reminding that this has been another disastrous year for cash, although deposit rates did increase slightly in the second half of the year. It is now possible to get 0.7 per cent on easy access from Cynergy Bank, while Shawbrook pays 0.67 per cent.

But that is still a dismal return with inflation heading for 6 per cent next spring.

The Bank of England did hike base rates this month but so far that has made no difference as the big banks have so far refused to increase savings rates (while rushing to raise standard variable mortgage rates). Outlook: Interest rates may climb next year but inflation will climb higher.another hard year for savers.

BONDS

Many pensioners buy funds investing in government and corporate bonds to generate lower-risk income and capital growth. Bonds could struggle next year because they pay a fixed rate of interest and this will look less attractive if inflation takes off.

For those who want some bond exposure, Emma Wall, head of investment analysis at Hargreaves Lansdown, tips Pyrford Global Total Return: “This invests in a mix of shares, government bonds and cash.” Outlook: Bonds pay a fixed rate of income.the higher inflation climbs, the worse this income will look.

HOUSE PRICES

‘Anything could

happen to Bitcoin next year... but you could say that

about every asset class’

The property market did it again in 2021, with the average property rising 8.2 per cent in the year to November, up £20,000 in a year, according to Halifax.

Inevitably, some areas grew faster than others. In Taunton, Somerset, prices jumped 21.8 per cent from £259,212 to £315,759 on average.

Newark in Nottinghamshire rose 20 per cent, with Chippenham, Braintree andwidnes close behind, Halifax figures show. Prices in Wales rose 14 per cent, with Yorkshire up 10.3 per cent and the East Midlands and East Anglia also doing well.

Prices rose just 2.9 per cent in the South-east and actually fell by 0.6 per cent in Greater London, although they still average a thumping £554,684.

Halifax managing director Russell Galley said buyers are seeking greater affordability and space: “There is less focus on major cities and more demand in the suburbs and further afield.” Outlook: With the stamp duty holiday over and economic uncertainty climbing, house price growth will surely slow. But few expect a crash, given supply shortages.

GOLD

Gold is supposed to shine in uncertain times but this year the price has fallen 4 per cent to around $1,800 an ounce at time of writing.

Laith Khalaf,aj Bell investment analyst, said: “It could lose its lustre in 2022 if central banks raise interest rates as expected.”

Outlook: 2022 could be tough on gold but it is worth holding some in case of shock news or a global crash.

BITCOIN

Leading crypto currency Bitcoin started off the year trading at around $30,000 then more than doubled to almost $70,000 in November. It has since fallen below $50,000.

Khalaf said: “Investing in Bitcoin is like spinning a roulette wheel. Only invest money you don’t mind losing.” Outlook: Absolutely anything could happen to Bitcoin next year, although in these bewildering times, you could say that about almost every asset class. Good luck!