2022 has been a wild year in the markets. With supply chains in disarray, an ongoing global pandemic, war in Europe, and fears of a worldwide recession, advisors were forced to navigate some rough economic waters. Here are the three biggest stories that reverberated throughout the year.
A Wild Year of Inflation
It is hard to talk about anything in 2022 without acknowledging inflation, which is tied into just about every big financial story this year. Today’s FOMC meeting is likely to see another 75 basis point rate hike emerge as the Fed attempts to blunt inflation’s impact. Tightening central bank monetary policy is happening around the world, and while inflation has remained persistent domestically, the U.S. is better off than many countries.
Inflation is also wrapped into the invasion of Ukraine, which is contributing to a widespread energy crisis given Russia’s importance in the energy sector. Supply chain issues that plagued that global economy throughout much of the year have also added fuel to the inflation fire that continues to rage around us. Inflation is likely to continue to impact the global economy, especially if rate hikes are the only tool employed to fight it.
But some ETFs have found success amid the inflationary environment. Commodities have benefitted, with funds such as the Invesco DB Commodity Index Tracking Fund (DBC) and the Teucrium Agricultural Strategy No K-1 ETF (TILL) being ballasts for many investors.
Crypto Winter
Bitcoin began 2022 sitting at $47,733.40. Fresh of record highs in 2021 and rapidly gaining institutional acceptance and enough widespread popularity to warrant a Super Bowl ad, crypto was poised for a big year. With the big launch of the ProShares Bitcoin Strategy ETF (BITO) in October of 2021, a pure spot bitcoin ETF seemed possible in 2022.
Then it all fell apart. Stablecoins Terra and Luna collapsed. NFTs went from the next big thing to an object of widespread ridicule following the collapse of the NFT market. Ethereum 2.0 launched with surprisingly muted fanfare.
Crypto winter has been bleak for many believers, but there are some signs that spring could be around the corner.
The Mighty Dollar
The strength of the dollar might be one of the more overlooked stories of the year. With the U.S. dollar looking hale and hearty compared to currencies around the world, investors who go in early on ETFs like the Invesco DB US Dollar Index Bullish Fund (UUP) are probably feeling quite good about their choices.
The strong dollar regime could be around for a long time as well, creating some interesting opportunities with domestic small-cap companies that can better afford goods and services abroad as their dollar stretches.
How to Stay on the Pulse of 2023
2023 looks to be every bit as wild as 2022, and advisors seeking to network with industry thought leaders and navigate the coming economic storms could find enormous opportunities at Exchange: An ETF Experience, which will happen February 5–8 in Miami.
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