It’s only been one month into 2022, and we already have market sentiments lingering on bearish outlooks and are doubtful of the bullish run’s ability to sustain any momentum moving forward into the second half of Q1. That being the case, more investors are leaning toward a defensive approach in asset management, and resource allocation as slowdowns in global economic growth are expected to happen throughout the year, necessitating a risk-off stance on the financial markets.
Furthermore, geopolitical developments, a disastrous labor shortage, and the global pandemic threat continue to adversely impact most industries, leaving the economy in a worse-off condition despite opportunities to stay above trend. So, to make sense of the clashing opinions and analyses, we’ll be going over some of the most urgent and relevant news to watch out for and how best to prepare your investment portfolio against bearish risks and fears of recession.
What to Expect and Look Out for Right Now
As of late, it’s difficult to pinpoint which of the most recent events demand the greatest attention, and considering that we are in the middle of market corrections and start-of-the-year policymaking, some would argue that accounting for everything is the safest approach available. However, three specific circumstances take precedence, namely the growing tensions between Ukraine and Russia, the Federal Reserve’s hawkish outlook on current inflation rates, and the rising presence of Metaverse real estate sales.
- Growing Ukraine-Russia Tensions: While Russia has never been one to hide its motives of reaching into Ukraine, Putin’s demands in the current standoff and the relentless sending of troops to the border have now escalated into the threat of invasion. As a result, even civilians are receiving military training for the sake of national security, and both the US government and NATO assure that any provocations will be dealt with swiftly. And in the case of global markets, it would warrant a move toward safe-haven assets.
- Hawkish Outlook on Inflation Rates: Apart from geopolitical relations, the most recent FOMC press conference revealed that the Federal Reserve is now taking a hawkish outlook on inflation rates, seeing it necessary to raise interest rates without threatening the current labor market. As a result, the market has reacted in preparation for the risk of further monetary policy being a lot tighter than expressed, despite low recession odds and declining equity valuations.
- Rising Presence of Metaverse Real Estate: Last but not least, although cryptocurrencies have entered a “winter” as prices have sharply declined in recent weeks, Metaverse real estate sales skyrocketed to $500 million by the end of last year, with forecasts pointing at a possibility to double in 2022. And suppose this trend continues to grow and more people diversify their digital assets into platforms like Sandbox, Decentreland, and other NFTs. In that case, expectations of another bullish run are likely to happen.
How to Prepare for Possible Buying Opportunities
Given the situations mentioned above, it’s clear that retail investors must prepare for the coming storm and implement ways of disaster-proofing their investment portfolios should the worst-case scenario happen. And to prepare for possible buying opportunities and dips that signal increasing volume for bullish momentum, you must consider increasing your savings, dollar-cost averaging every week, and hedging your investments with cryptocurrency.
- Increase Savings and Cut Back on Spending: There’s no denying that the age-old advice to increase savings and cut back on spending always appears, no matter the economic circumstances. However, having emergency funds ready and available is more important than ever, considering forecasts expect a steep drop in prices. That being the case, limit your purchases to essentials and prioritize hobbies that offer more sustainable use, like designing crafts with vinyl or taking an accredited online course.
- Dollar-cost Average Into Stock Dips: Over the past few weeks, stocks in the tech industry have seen a sudden nosedive in prices, and while many have entered a healthy range, dips are expected to happen more frequently in the future. Due to this opportunity, the best approach one can take is dollar-cost averaging into stock companies that can offer the most value and have shown a history of growth and recovery.
- Hedge Your Investments With Cryptocurrency: While hedging with cryptocurrency during a supposed “crypto winter” may not sound like the smartest of plans, diversifying at least 5% to 8% of your portfolio has been proven to increase profit margins. And with most of the largest market share coins are currently available at a bargain, you could catch the next swing upward much earlier and take advantage of the subsequent increase in the volume of orders.
Hope for the Best, Prepare for the Worst
In conclusion, there’s no guarantee of what will happen in the near future or the rest of 2022, for that matter, but we must stay optimistic while preparing for the worst to come. In doing so, you will be ready for any further economic disruptions down the line or opportunities to maximize your gains as well.