Wednesday, December 29, 2021
Crash or rally: what will the stock market year 2022 be like?
By Thomas Badtke
In 2021 the stock market will only know one direction: up. The Dax crosses the 16,000 mark for the first time, although it was just above 13,000 points at the beginning of the year. But what does it look like in 2022? Experts say where the journey could go, identify risks, determining topics, industries and stocks that one should keep an eye on.
The Dax ends the first day of trading in 2021 with 13,727 points. In the meantime, the German stock exchange index has exceeded the 16,000 mark this year, marking its new all-time high at 16,290 points. The Dax is currently trending just under 16,000 points and thus still has a double-digit percentage increase in this stock market year. So it’s no wonder that the experts agree: “2021 was a good year for the stock market – not only in terms of the percentage return, but also in terms of the fluctuation range and volatility,” says Benjamin Feingold from Feingold Research. “This was kept within limits, apart from one or two relatively small setbacks, it was a very quiet year on the stock market – compared to the Corona year 2020, for example,” explains the financial market expert.
“2020 has revealed to us the limits of what can be forecast”, Marco Herrmann, managing director of Fiduka Depotverwaltung, looks back briefly and speaks of a “good stock market year 2021”. But he qualifies: “Despite the double-digit percentage growth, the Dax is clearly lagging behind the Dow Jones and S & P-500 or other European indices.” He explains: “That has to do with the mix of industries: There are few banks and financial stocks in the leading German stock exchange index that have generally performed very well this year. In addition, the Dax has only two real tech titles with SAP and Infineon. That’s enough in the end not in order to heave the Dax up in comparison with other indices. “
“Big players” as draft horses
“The big players were in demand internationally,” explains Carsten Riehemann, managing partner at asset management Albrecht, Kitta & Co. “This trend, which already developed shortly after the corona shock in spring 2020, was able to continue in 2021: The very large companies with a lot of cash in their pockets were again the main drivers of the world stock exchanges – and ultimately also the Dax.” Riehemann refers to Apple, Alphabet or Microsoft.
Michael Gollits, Director of Asset Management Von der Heydt, who also speaks of a “decent DAX plus” sees it similarly: “If you look at the chip crisis and supply chain problems, the DAX performance is quite impressive,” says he. “At the same time, it should not be forgotten that there were only a few companies that really pushed. Nasdaq, for example: Half of the profits came from just five stocks, the usual tech suspects, the firers of digital life.”
2022: Buckle up and hold on
Will the “Big Ones” also leave their mark on the 2022 stock market year? Here, too, the experts agree: It should be difficult, also because of the high ratings: “Apple is now as big as the entire German stock market or even the British one,” says financial market expert Riehemann and speaks of “giga corporations”.
The experts also agree that another topic will determine investor behavior in 2022: inflation. “The monetary policy of the central banks will remain the overriding issue,” says Riehemann with certainty. “The ultra-loose monetary policy is being pulled back step by step, the ‘tapering’ is picking up speed and so it is now: It’s crunchtime! What will happen in the end without the cheap money? Can the markets see themselves and grow out of themselves? ” Riehemann thinks they can do it: “What is required for this is a broader set-up in the USA, so that the price increase is spread over several shoulders and not just borne by five or six values.”
“The European Central Bank,” says Fiduka managing director Herrmann, “will continue to buy bonds on a large scale in 2022. The whole thing then more under the guise of the ‘green deal’ and no longer under the keyword of the corona crisis.” For Herrmann it is also clear that the US government under Joe Biden will try everything again “in terms of spending” before it may no longer be possible to “rule through” through the mid-term elections. “In addition, the global economic recovery will continue – although the subject of inflation will not disappear from the agenda,” emphasized Herrmann.
Financial market expert Feingold sees it the same way: “At least in the first half of the year, I expect inflation to remain high,” he says. “This includes three rate hikes in the US. There is a risk of lower profit margins. And the question will be: Can companies pass the cost pressure on?”
A driver of inflation the high raw material prices are likely to remain. “If the global economy continues to recover, as current leading indicators suggest, the demand for raw materials will also remain high, which will also be fueled by the increased expansion of renewable energies on both sides of the Atlantic,” explains Von der Heydt board member Gollits. “In Europe, however, inflationary dynamics will cool down in the coming months,” he emphasizes and refers, for example, to the base effect of the meanwhile lower value added tax in this country, which helped to get consumption and the economy back on track during the Corona crisis. “A base effect should also take effect when it comes to the oil price,” says Fiduka board member Herrmann, pointing out that in 2020 prices were “partially below zero” and then temporarily rose to over $ 80 per barrel (159 liters) in 2021.
All eyes open …
“Price increases on the raw materials side could put pressure on margins, especially in the industrial sector and with cyclicals. That could put a strain on their share prices,” commented stock exchange expert Feingold. “In my opinion, the chip industry is one of the favorite sectors for 2022 in terms of price performance: On the one hand, the shortage of chips is pushing prices. On the other hand, the digitization trend continues unabated and is fueling demand.”
“Investors should keep an eye on the health sector,” says Fiduka board member Herrmann. “On the one hand, there are the very volatile beneficiaries of the Corona crisis and, on the other hand, there are also recently neglected values - such as a Merck,” he explains. Gollits’ list also includes “everything that has to do with climate change and digitization” and Riehemann says: “green issues, hydrogen and robotics”.
However, the managing partner of Albrecht, Kitta & Co. warns investors not to expect another quiet stock market year like 2021: “Major corrections cannot be ruled out, also because Corona has come to stay,” he says. “But I tend to expect setbacks like in the fourth quarter: One shaker and it goes on, also because investors have used the price losses to get in.”
For financial market expert Feingold, it is clear that the final quarter of 2021 could serve as a “blueprint for the coming stock market year”: “The fact is that stocks are still an indispensable part of investors when it comes to returns.” “There is enough cash at the moment,” emphasizes Fiduka board member Herrmann. “A good prerequisite for further rising prices in the Dax as well – and for another good year on the stock market.”