2022 mid-year outlook - where do investors go from here?

Volatility will define financial markets in the second half of 2022, but there are major reasons for investor optimism, says deVere Group's Nigel Green at the midpoint of the year as investors take stock of the past six months and look ahead to the last half of 2022.

Green said: "The first half of 2022 has been challenging, to say the least, for investors seeking both capital growth and capital protection. 

"With soaring inflation, interest rate rises, slowing growth, the pandemic still not over, and geopolitical tensions including a tragic war in Europe, uncertainty has been heightened which has unleashed huge waves of volatility in financial markets.

"For many investors, it has been the perfect storm with both stocks and fixed income hit with simultaneous bouts of weakness, making proper portfolio diversification more difficult to achieve."

He continued: "However, despite turbulence still being the defining characteristic of the second half of 2022, there are four key reasons why investors should be optimistic for the next six months.

"First, our latest thinking is that inflation could be peaking soon, and we expect it to decelerate through the rest of this year. History shows that the markets typically fall just before the peak in inflation, just as we have experienced in recent months. This will be bullish for stocks.

"Second, as markets continue to be unsteady in the near-term, investors will be using the downturn to their financial advantage by topping-up their portfolios with quality stocks at lower prices.

"The panic-selling has created some important long-term opportunities with high upside potential and low risk possibilities for those who buy judiciously.

"Third, China is beginning to loosen its strict Covid restrictions which will help ease global supply chain disruption, which is positive for companies and consumers.

"And fourth, financial markets have already priced-in much of the bad news from geopolitical issues, meaning there should be less wild swings in the months ahead."

In this environment, the deVere CEO said investors wanting to safeguard and grow their wealth should be proactive. "You should be fully and sensibly invested in a properly diversified portfolio. 
"Whilst you may be tempted to stash cash during periods of volatility, experience demonstrates that such attempts to ‘time the market' almost always fail.

"You should resist complacency, be active, revise and adjust with an adviser to build a resilient and dynamic portfolio, perhaps with some less-traditional, return-enhancing assets."

He concluded: "After a difficult start to the year, the rest of 2022 will remain volatile - but there's much to be done to grow your wealth.

"This is the time to remain fully and cleverly invested."