Where to invest in 2022

Deciding how and where to invest your money is never an easy task – but when you’re in the middle of a global pandemic it’s even more challenging.

We asked a string of financial experts to suggest which countries, sectors, funds and companies may be worth considering in 2022.

Countries

Simon Gergel, manager of The Merchants Trust, believes the UK stock market is one of the cheapest in the world – and remains highly polarised.

Despite ongoing Covid-19 variants, the risks of continued supply chain disruption and rising inflationary pressures, he expects the economy to grow at a decent pace in 2022.

“This is providing excellent opportunities for stock pickers to identify strong businesses, trading at attractive valuations, which can deliver a high income and good total return over the long term,” he said.

Adrian Lowcock, an independent investment adviser and commentator, suggests the US small and mid-cap names could do well over the coming year.

“The sector has seen strong earnings growth, but not the share price performance compared to large US growth companies,” he said. “They look more attractive on a valuation basis and should also benefit from a focus on domestic growth as global supply chains have come under pressure.”

Sectors

Alex Wright, portfolio manager of the £3bn Fidelity Special Situations and the £935m Fidelity Special Values PLC, believes there are plenty of interesting UK-focused sectors.

“We believe Inchcape and Halfords are well positioned to take advantage of supply constraints in cars and bikes due to their superior supply chains,” he said. “We also have exposure to building materials in short supply, such as brick distributor Brickability.”

Alternative energy and real estate investment trusts (REITS) are expected to be the best performing sectors in 2022, according to a poll of investment company managers.

The study by the Association of Investment Companies (AIC) also found they regarded software and computer services offered the most attractive opportunities on a five-year view.

Andy Merricks, co-manager of the 8AM Focused Fund, agreed that technology will continue its march, with cybersecurity a particularly attractive area.

“Whatever happens in the world, the need for better cybersecurity isn’t going away,” he said. “You can get exposure to the cybersecurity sector through exchange-traded funds.”

Funds

Ben Yearsley, investment director at Shore Financial Planning, highlighted the Matthews China Smaller Companies fund as a possible contender.

“It’s well placed to capture the affluent and growing middle classes in China,” he said. “Healthcare and technology are two of the largest sector weights.”

He also cited the Fidelity Asia Pacific Opportunities fund run by Anthony Srom, who he says likes buying into ideas before they’re noticed by others.

“I’m a major fan of Asia as a long-term investment theme and it should be due a better Covid recovery bounce next year,” he added.

Environmentally-friendly

Dzmitry Lipski, head of funds research at Interactive Investor, suggests the BMO Sustainable Universal MAP Cautious, Balanced, and Growth funds.

“The three BMO funds stood out from the competition due to their sustainable investment philosophy, how the funds invest and manage risk, as well as BMO’s focus on low costs,” he said.

“The BMO team has a successful long-term track record of producing strong risk adjusted returns in running multi-asset ESG products.

Darius McDermott, managing director of FundCalibre, suggests the Artemis Positive Future fund, which seeks companies creating transformational change, is worth considering.

“It’s a global growth fund with sustainable considerations and a focus on mid-caps,” he said. “It’s quite concentrated and differentiated, so we like it for those reasons.”

Companies

According to Danni Hewson, financial analyst at AJ Bell, retailer Pets at Home should be considered – especially given how many people have bought animals since the first lockdown.

“We were already a nation of pet lovers but Covid has doubled down on that and Pets at Home has been a grateful recipient of our proclivities,” she said.

Hewson pointed out that pet lovers take a “no expense spared” approach to their animals.

“While many of us will be feeling the squeeze on our finances, things will have to get much, much worse before we dial back on pet care, so expect further growth for this smart outfit in 2022,” she added.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, believes rising interest rates could be good news for Lloyds Bank, with its focus on traditional lending.

“The group also has one of the UK’s largest bank branch networks, which is an opportunity for cost savings if it decides to close further branches,” she said. “It also has an impressively low cost/income ratio, making it more resilient in tough times.”

Streeter also pointed out how cost savings were being achieved through increased digital services, which is an area of future growth as more people shift to online banking.

“Excess capital, possible interest rate rises and opportunities for growth are a tempting mix,” she said. “If interest rates don’t go up in the predicted trajectory, Lloyds may struggle to improve profitability.”