2022: Emission rights, energy, electric vehicles, technology, oil, crypto & gold
Mankind has no difficulty yet in surviving climate change and the resulting increasingly common extreme weather. On the other hand, it gives rise to significant redistributions of wealth. The inhabitants and economies of small underdeveloped island and coastal nations can experience enormous difficulties, while most developed countries do not in practice experience much more than increased news reporting on heat, cold, smog, floods, hurricanes, vegetation and refugee flows. Some will probably be affected so little that they are not even sure if climate change exists at all.
One thing that is still fairly certain is that the UN has decided to try to stop global warming. and to do so with, among other things, incentives to reduce greenhouse gas emissions. You and I are among the privileged in the world, climate change is not really here. No matter what we do, floods, hurricanes or particularly troublesome extreme temperatures will be rare in the Nordic countries. On the other hand, financial markets can be significantly affected, and this is something that actually matters, regardless of whether our increased or decreased capital primarily affects our charity plans, our children or just ourselves.
In the short term of about a year, climate policy does not usually mean much, so for 2022 I believe that other issues will dominate the financial markets. The Fed has begun to tighten due to high inflation. I think the inflation figures and slightly higher interest rates may bring down the stock markets in the US and Europe. This applies in particular to growth companies with low or negative margins, or extremely high valuation multiples. I am thinking, for example, of companies such as Uber, Beyond Meat, Robinhood, Peloton, AMC, Zoom, Cloudflare, Docusign, Bill.com, Snowflake. But the austerity measures and higher interest rates also risk pushing down the prices for cyclical engineering companies and discretionary slightly more expensive consumption. In that category I find, for example, Cintas, Boeing, Copart and Carrier Global - and if you want Swedish sales candidates, I think that Volvo Cars and EQT could fall more than OMX. Even Embracer and Evolution gaming's stock prices give me a little dizziness when I think about what a combination of a higher discount factor and economic slowdown should lead to.
In such a risk-off environment, you should probably also beware of cryptocurrencies, but if they should fall really deep, for example down to 25-30 thousand USD for Bitcoin, it could be time to try to buy more than you had before, ie you could use the race to gain extra large exposure to one of the few sectors that may over time provide some protection against all possible political mistakes. By the way, many believe Ether is probably a better investment alternative than Bitcoin, so one could overweight ETH relative to BTC in a crypto portfolio.
When I'm still on the subject of politics, insurance and climate, one should really not forget of the potential supertrades of the coming years: emission rights. They make one's portfolio antifragile, ie the worse it looks for the climate and many other investments, the more the system could favor emission rights to increase the pressure against reduced carbon dioxide emissions. Politicians in Europe have recently suggested that nuclear power should be considered a sustainable energy source. That view is said to be reinforced with every local energy shortage and energy price peak we see, as high energy prices and power outages clearly point to the problems of solar power and wind power - if it does not shine or blow, there is no electricity. It is expensive and difficult to store electricity and today there is very little infrastructure for it at the same time as the expansion of solar and wind is ahead. The need is thus in practice almost infinite for both a base power from uranium-powered nuclear power and all environmentally friendly storage solutions you have time to produce. Energy storage and uranium companies could be considered, as well as the battery and electric motor industry, so you really live as you learn.
January is a good opportunity to think about whether you have a well-thought-out plan for your investments, both long-term and short-term. Are the long-term investments really long-term, ie the conviction will remain even if the prices are dragged down in a general stock market fall. Is the long-term well-founded, such as my view on emission rights, energy storage and electric vehicle raw materials? If not, for example, if your investments are more tailwind-oriented, as I suspect is the case in some hyped computer game and online casino companies, not to mention some of the series acquirers, then you could take the opportunity to park the money elsewhere for a while. This is especially true if you think that my view of higher interest rates and lower growth in 2022 seems reasonable.
After that, one should probably expect renewed stimuli, both in the form of reduced interest rates, quantitative easing and fiscal packages (including citizens' salaries as in the US during the Covid pandemic), and then maybe the tailwind investments will work again, at least in the large index-driven companies in the US (Microsoft, Alphabet with several usual suspects).
In short, you can summarize that you should be ready to create a return on future volatility. The world, the economy and the financial markets are like tense feathers drawn to near the breaking point. Even if we then return to more of the same thing that has applied since the financial crisis in 2008, there are large relative movements to take advantage of in the short term. Only in 2022 do I hope to float with gold upwards at increasing speed, be able to bargain Ether and a little Bitcoin at surprisingly deep dips, start the long journey for emission rights while oil and oil companies may rush upwards due to too little oil exploration investments combined with too little nuclear power and energy storage capacity. The whole complex of energy, environment and inflation (plus renewed stimuli) could play into the hands of companies like Leading Edge Materials. On the one hand, the demand and price of battery anode graphite and electric motor metals (Heavy Rare Earth Elements) is increasing, and on the other hand, the pressure from the EU on Sweden to finally grant more mining permits is increasing.
2022 can be a year of unusually jerky tug-of-war between FEAR and FOMO (fear of missing out), a year where you can partly benefit from fast movements by folding back and forth between different holdings where both have a high and inherent value, and partly can utilize unmotivated movements to make really good inroads into long-term assets. Large and fast movements could create extra good conditions for using exchange-traded products and other derivatives to quickly change their total exposure without having to change their core positions.
In summary, be prepared for an unusually volatile market, and not least steel yourself mentally to avoid being surprised by your own fear and greed in price movements you yourself consider unmotivated and illogical. Above all, there is a point in looking forward to a year with great opportunities to increase holdings in their favorite assets by sidesteping large price falls and bargaining long-term logical and attractively valued assets if they fall sufficiently relative to even other capital. If you have the money in, for example, gold, it could be exchanged for much more crypto assets later this year. And if you own oil and oil companies, you should probably get a lot more games of various kinds for the money later on. I teach methods on Finanskursen.se for portfolio optimization by utilizing relative movements between different assets to gradually accumulate more and more units of each. Another pair change I am looking at is to sell my Nvidia today to Intel, so I can buy more units of relevant technology companies within a year, maybe TSMC or ASML, or simply Nvidia again. It looks like 2022 could be a year with unusually large opportunities to improve its investment portfolio - especially if you first make it antifragile, and then logically and long-term take advantage of any extreme volatility.
This information is in the sole responsibility of the guest author and does not necessarily represent the opinion of Bank Vontobel Europe AG or any other company of the Vontobel Group. The further development of the index or a company as well as its share price depends on a large number of company-, group- and sector-specific as well as economic factors. When forming his investment decision, each investor must take into account the risk of price losses. Please note that investing in these products will not generate ongoing income.
The products are not capitalprotected, in the worst case a total loss of the invested capital is possible. In the event of insolvency of the issuer and the guarantor, the investor bears the risk of a total loss of his investment. In any case, investors should note that past performance and / or analysts' opinions are no adequate indicator of future performance. The performance of the underlyings depends on a variety of economic, entrepreneurial and political factors that should be taken into account in the formation of a market expectation.
This information is neither an investment advice nor an investment or investment strategy recommendation, but advertisement. The complete information on the trading products (securities) mentioned herein, in particular the structure and risks associated with an investment, are described in the base prospectus, together with any supplements, as well as the final terms. The base prospectus and final terms constitute the solely binding sales documents for the securities and are available under the product links. It is recommended that potential investors read these documents before making any investment decision. The documents and the key information document are published on the website of the issuer, Vontobel Financial Products GmbH, Bockenheimer Landstrasse 24, 60323 Frankfurt am Main, Germany, on prospectus.vontobel.com and are available from the issuer free of charge. The approval of the prospectus should not be understood as an endorsement of the securities. The securities are products that are not simple and may be difficult to understand. This information includes or relates to figures of past performance. Past performance is not a reliable indicator of future performance.