What to invest in for the rest of 2022?

The sectors that are currently "pulling"

Investors may now be wise to avoid cyclical stocks - that is, companies whose financial performance is significantly dependent on the economic cycle. Companies like Netflix or Starbucks may be under pressure as a result, as they will be one of the first places consumers save in times of belt-tightening. The same can be said for luxury goods companies.

So it may now be more interesting to seek out so-called defensive stocks - that is, stocks of companies that generally outperform the market even in times of uncertainty. But that doesn't mean that these stocks can't fall in the event of a market washout. Defensive stocks include, for example, mobile phone operators. For example, if you look at a chart of T-Mobile US (ticker TMUS), you might be shocked to see that this stock is trading near an all-time high. Thus, T-Mobile US stock has completely ignored the indices this year, having gained nearly 30% since the beginning of the year (see chart below).

 

Other examples of defensive stocks include companies whose business revolves around electricity or water - things that are hard to reduce consumption of. Counter-cyclical stocks can also be an interesting choice - by this we mean companies that, in contrast, increase their revenues in times of belt-tightening. There aren't many such companies, but one example is the low-priced goods chain Dollar Tree.

_{TMUS stocks}

Time favours speculation on market decline

However, if you are afraid to buy stocks in such uncertain times, it may be best to take the fate of your money into your own hands and manage it actively. The current high volatility across the markets offers interesting trading opportunities for speculators. So if you are an investor who is willing to go "against the tide", there are many instruments for you to "short" - that is, speculate on falling markets.

 

Shorting stocks has paid off handsomely so far in 2022. Among the worst stocks in the S&P 500 index was the aforementioned Netflix, which wrote off over 60% of its capitalization in the first eight months of the year. Other famous companies such as Meta Platforms and PayPal also lost over half of their value. The summer rally in the stock markets, however, also favoured growth speculators. PayPal's chart below shows that high volatility favored traders in both directions during the year.

_{PYPL stocks}

What to avoid?

The world of cryptocurrencies is a separate chapter, as it reacts even more sensitively to global news than other assets. The current prices of the major cryptocurrencies may look attractive, but in the event of a correction in global markets, cryptocurrencies are likely to fall as well, possibly in freefall. Thus, such speculation may be better avoided altogether for now. One thing is clear, however - holding too much of one's wealth in cash does not make much sense in the current inflationary environment. Still, the fate of your money is entirely in your hands.