The biggest stock market trends and how to invest in 2022 to grow your portfolio
This could be the most important message you’ll get as an investor right now. In fact, what I’ll tell you in this post…how to invest $1000 in 2022 and five stocks to buy, honestly you’re going to hear that on lots of blogs.
But what I’m going to tell you right now, you’re not hearing anywhere else and it’s the one thing you NEED to hear.
You are being tested!
The stock market is crashing and testing investors to see who has the intestinal fortitude, the guts to keep investing. To see if you continue to do the kind of quality analysis we do here on the channel to find strong long-term investments and look past the short-term noise and pain.
Understand though, even with that analysis, when the market crashes…everything will crash. Shares of Amazon fell 95% to $5.60 each in the dot-com crash to 2001. Apple, hardly a ‘housing bubble stock’ fell 59% to less than $3 a share on a split adjusted basis in 2009.
The best thing you can do is have that faith in your convictions, the faith that comes from good analysis. Hold on to the best stocks and know that analysis will prove you right. Shares of Apple have returned 5,700% to those that held on from the 2009 crash and Amazon has returned 56,000% since 2001, turning a $1000 investment into half a million dollars!
Do NOT give in to the fear of a stock crash. Stay strong, keep investing and you WILL make money!
In this video, I’ll reveal the five unstoppable market forces affecting stocks this year, which will push stocks higher and which could drag them lower. For each, I’ll show you a stock to buy for a 2022 portfolio that can survive. Stick around and towards the end of the video, I’ll show you how to invest $1000 in a portfolio to make money no matter what happens to the market.
Investing in 2022 on Higher Interest Rates
Our first market trend for investing in 2022 is the big one, rising interest rates. The Federal Reserve, the nation’s central bank dropped its rate to almost zero during the pandemic and pushed trillions into the economy…now it’s reversing that stimulus though.
Those higher interest rates are likely to eventually push us into the recession that causes the next stock market crash. In fact, the Fed raising interest rates is one of the three most reliable factors that have proceeded recessions in the past.
While a recession would hit all stocks, there is one sector of the economy that does well with higher interest rates. Banks and other financial companies make their money borrowing from you at low deposit rates and then lend the money out at higher long-term rates. The rate on a 30-year mortgage has nearly doubled in the past 15 months, increasing the spread profit for commercial banks.
You could go with the mega-cap banks like Wells Fargo or Bank of America here but I also like New York Community Bancorp, ticker NYCB, for its valuation and 6.7% dividend yield.
The bank is a leading producer of multi-family loans in New York with 50 years in the market and is aggressively expanding nationally with its Flagstar Bank acquisition announced last year. It now has nearly 400 branches and $87 billion in assets across eight states.
Shares trade for just 0.72-times book value which is well below most banks. For example, Wells Fargo trades for 1.05-times book and Bank of America trades for a price of 1.2-times book value so with NYCB you’re getting an upside potential on appreciation along with that dividend.
Investing in 2022 on Strong Consumer Spending Trends
Interest rates are what I think will eventually tip us into a recession but there are some market trends supporting the economy and the biggest one here, the fact that consumers and consumer spending is still very strong.
Consumer spending makes up 70% of the economy so it’s always important to know how this is developing and there’s no better resource than what the banks are saying when they report earnings each quarter. In its most recent earnings, JP Morgan reported credit card spending jumped 29% in the first three months of the year versus the same period last year. Part of that was a 64% increase in spending on travel and dining. Consumers are anxious to get out and spend.
The bank also reported credit car balances increased by 15% over the quarter, so people aren’t worried about a coming recession. The average card balance was still below 2019-levels but people are back to spending like they did before the pandemic.
And despite higher credit spending, deposit savings for consumers and small businesses were also up 15% in the quarter. Consumers still have plenty of cash and aren’t likely to pull in their spending anytime soon with rising savings.
Add in here a job market with unemployment at historic lows and rising wages and you get a very strong environment for consumer spending and the economy in 2022.
On that increase in credit spending, I like Discover Financial Services, ticker DFS, for its exposure to the trend.
Discover pays a 1.7% dividend yield, well above the yield you get on competitors like Mastercard and Visa, and the price of just 6.7-times earnings puts it in value territory.
2022 Stock Market Trends: Commodity Prices and Ukraine
Another major trend in 2022, the commodity price shock on the Ukraine invasion. The price of oil surged to $130 a barrel earlier this year and is still trading over $100 since March. Along with it, the price of grains like wheat and barley have also jumped higher and every investor needs some kind of commodity protection.
Now the price of oil is likely to come down to a range between $75 to $90 a barrel if we get a negotiated settlement between Russia and Ukraine but even at that price, oil stocks are going to be cash flow machines.
This research is a little dated but still shows the cash flow power some oil stocks can have at $70-plus oil. This is the break-even price for the major oil companies with the 2021 break-even shown in red dots. Notice most of these are profitable with oil at $60 and below and a few of them; Chevron, RDS and Total are profitable at $50 a barrel.
Oil Prices and 2022 Stock Market Trends
Oil companies aren’t spending as much as they used to on new exploration. Instead, they’re returning that cash flow to shareholders in big dividend increases and share buybacks.
Even after the run in shares, I like Chevron, ticker CVX, on it’s low cost of production and 3.3% dividend yield. Chevron increased its dividend by 6% this year and is still producing over $18 billion in free cash flow.
Investing on a Strong Economy in 2022
Another factor here supporting the economy and stock market, the fact that interest rates are still extremely low.
In fact, economists estimate that 10-year Treasury rate has to get up to 3.5% to 4% before higher interest rates actually start to drag on economic growth. So don’t believe all these chicken little YouTubers screaming the sky is falling from the economy just because interest rates are rising a little.
Money is still cheap to borrow, spending is still strong and will be for the rest of 2022. On that environment, I like beaten-down Groupon, ticker GRPN, one of the seven stocks I highlighted recently in a video of my largest investments.
I like Groupon for a lot of reasons; on that consumer spending theme, on the potential for a takeover and just from the steep valuation discount on the shares. On cash and investments held by the company alone, I think the stock could be worth $30 a share or more over the next year.
Inflation and the 2022 Stock Market
One more market trend before we get to that portfolio of how to invest $1000 in 2022, another big one here, inflation!
Consumer inflation jumped 8.6% in the year to last March, the highest in more than 40 years, and while it could start coming down a little …higher prices are here to stay.
The problem is that inflation is starting to feed into itself. People are now expecting prices to go up even more so they ask for higher wages to cover it, and with the job market as tight as it is, they’re getting those wage increases. From this, companies are raising their prices to cover higher costs on everything from materials to wages and the cycle just keeps running higher.
Few stock sectors do as well against inflation as real estate and one of my favorites here is Medical Properties Trust, ticker MPW.
MPW is the second largest owner of hospitals in the world with 442 properties and rare international exposure for a REIT, operating in 34 U.S. states and nine countries.
And I really like the company’s business model here. It buys properties owned by healthcare providers then leases it back to them on 20-year terms for triple-net payment. That frees up the healthcare provider to do what they do best…providing the service, and MPW takes care of the property and has a long-term tenant. Plus, that triple-net lease means the tenant pays all property costs…MPW just sits back and collects the checks so operational costs are extremely low.
Ninety-nine percent of the properties have built in rent escalators based on inflation, so the company is covered on that front. Shares pay a 5.9% dividend and trade for just 12-times FFO.
How to Invest $1000 in 2022
Now you’ve got those five stocks and five market trends for 2022 but building a portfolio that will make money means having core- and long-term investments for that long-term growth. Here I’ll show you how to invest $1000 in a portfolio that not only does well this year but for years to come!
The way we’ll do this is to build a portfolio of three- to five-funds for a core part of your money, forty- to sixty-percent of your money in broad funds that will give you market returns and safety across different assets. That’s going to smooth out anything that happens this year so you don’t freak out and panic-sell your stocks if the market crashes.
With the remaining portion of the portfolio, we’ll add five stocks for the long-term growth that will drive your returns for decades to come. On top of this long-term theme, you can add the five stocks we talked about in this video for that shorter-term growth and stability in today’s stock market.
We’ll start with the SPDR S&P 500 High Dividend ETF, ticker SPYD. The fund invests in the 80 highest paying dividend stocks in the S&P 500 , the biggest companies in the U.S. and has returned 11.3% annually since inception with a dividend yield over 4% a year.
To that dividend fund, we want to add a little growth with the Vanguard Growth Index ETF, ticker VUG.
This fund has produced a 16% annual return over ten years and holds shares of 266 companies with a focus on growth, some of the biggest tech names out there like Apple, Microsoft and Amazon so you get growth but also the stability that comes with these mega-size companies.
With those stocks, usually you want to add some protection with a bond fund and I do like the Vanguard Short-term Bond ETF, ticker BSV, as an option but by far one of the best opportunities in investing right now is in Series I Savings Bonds.
These are savings bonds you can buy directly from TreasuryDirect.gov so there’s no fees and you can buy with as little as twenty-five dollars. I Bonds have a built-in inflation protection which means the interest rate has surged over the past year.
I Bonds are now paying over 9% interest, so you’ve got the safety of bonds…you’re guaranteed to get that return plus your money back, and you won’t pay state or local taxes on the income like with most bonds or investment returns.
It’s a return as high as stocks with the safety of bonds which isn’t something you get often so these belong in every investor’s portfolio.
On those two stock funds and the bonds, I would add some real estate stocks and you can go with a fund like the Vanguard Real Estate ETF, ticker VNQ, or a few individual real estate investment trusts.
With just those three funds and the I-Bonds; you’re going to get stock market growth and income, you’ll get exposure to real estate for those inflation-fighting returns and the safety of bonds to protect your money when stocks crash .
On top of this, I would add five- to ten stocks for the long-term growth that will add returns to your portfolio. This list is just an example, five of the investments I’m making for the next decade and beyond. We won’t go into each of these because I just posted a video on the seven stocks I have over $250,000 invested in my own portfolio. The four stocks and two cryptocurrencies here are my highest conviction investments for triple-digit growth over the next ten years.
That gives you a solid long-term portfolio with safety and stability in the core portion and growth in those individual stocks. On this you can add those shorter-term stocks for 2022 we talked about in this video for a complete portfolio to invest $1000!
Don’t Miss the Entire 2022 Investing Series!