Inflation, higher rates and a mature bull

Market watchers are heading into 2022 with a mixture of optimism and wariness. Over the last couple of years, the stock market and the real economy have not moved together in the same direction. Even as economic growth contracted because of the Covid-19 pandemic, stocks continued to rise, thanks to central banks keeping interest rates super low and issuing stimulus cheques.

However, the easy money has been made. Investors this year must brace for more volatility, given the ever-higher valuation of hot stocks and worry over interest rate hikes. Just look at how the Nasdaq on Jan 21 suffered its worst week since March 2020 when it was spooked by the growing spread of the Covid-19 virus before the unexpected retail-led rally reversed the tide. Younger market investors are also being confused by an unfamiliar macro-economic environment: inflation.

So what should investors look out for? Which are the sectors that might do well? And which are the ones to avoid?

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