To be a successful investor, you need to approach the markets with a long-term view, although that doesn’t mean ignoring short-term volatility. At the time of writing, the US stock market was down more than 20%, yet such movements shouldn’t instil panic or fear — instead, you could treat them as an amazing opportunity to buy stocks ‘on sale’ and at bargain prices, and a chance to set your portfolio up for success.
Identifying long-term investing trends while taking advantage of short-term volatility could lead to significant gains, so as we approach the year’s final countdown, let’s look to the future and highlight some popular long-term trends.
1. Covid continues
The pandemic may be ‘over’, but its effects are still being felt around the world, and on the stock market. High inflation caused by supply-chain issues and congested ports, high interest rates wreaking havoc on housing markets, and labour shortages caused by the lack of immigration all bear the hallmarks of the Covid hangover. Despite all this, stocks have proven to be an effective inflation hedge over the long term, and much better than having your money losing value in the bank. Companies that have pricing power can easily pass on their higher costs to their customers, allowing them to maintain or even increase their market share over time. In the short term, though, concerns around inflation can spook investors and cause the stock market to bounce around more than usual.
2. Meme stocks
Over the past year especially, we’ve seen a significant rise in the retail or everyday investor, due to the emergence of DIY trading platforms such as Sharesies, which have majorly increased their presence Between mid-2020 and mid-2021, when people were stuck at home with plenty of time on their hands, the popular trading app Robinhood (the US version of Sharesies) saw user growth more than double from 7.2 million accounts to 18 million accounts. This led to the rise of ‘meme stocks’ — stocks like GameStop, AMC Entertainment and BlackBerry, whose share prices have soared due to investors sharing information on social platforms and buying in packs. This is a very risky investing strategy but something we’ll see more of as information sharing becomes easier every day, which could lead to a much more volatile market going forward.
3. Conscious investing
Environmental, Social and Governance (ESG) investing [which concerns a business’s impact on society and the environment, and how accountable it is] has taken the financial world by storm in the past few years. The disruption and uncertainty caused by the pandemic ignited a renewed interest from investors, consumers and employees in favouring corporations that prioritise ESG and are more purpose-led than performance-led. Purpose-led organisations hope to set the pace for a better future. By focusing their efforts on reducing carbon emissions, minimising waste, supporting communities and promoting equality, they’re redefining the role of business in society. Figuring out if a company is ‘good’ can be a tricky and subjective task, though. Instead, you might be keen to opt for a socially conscious ETF [exchange-traded fund] that invests in highly rated ESG companies — the iShares Global Clean Energy ETF, for instance.
4. The Metaverse
There’s no doubt that the internet of the future will be different to what it is today. Thanks to greater computing power and faster connectivity, tech companies are creating online worlds in which we can shop, play, exercise, learn and experience most life activities digitally. Even Facebook has changed its name to Meta to prove its commitment to this metaverse. Interest in these virtual environments is growing, and many other companies are trying to be part of the trend. One example is art gallery Sotheby’s, who announced in 2021 that their non-fungible tokens (NFT) sales would reach $100 million and began operating Sotheby’s Metaverse, a new 3D virtual gallery. Even though 2022 was pretty rough for the price of NFTs and cryptocurrencies, it’s likely they’ll be much more prevalent in the future.
