Why the next year can be a financial roller coaster and what to do about it?

Factors like soaring oil prices, high inflation, and the Russia-Ukraine crisis are bound to cause havoc in the stock market this year. Hence, you must properly manage and diversify your portfolio to make profits from the market.

 How to be prepared for the expected upcoming market volatility

Over the last 12 months, the stock markets throughout the globe have been on a roller coaster ride. While they nosedived in the first half of 2021 due to the covid scare, they started to bounce back from the middle of the year. However, from the beginning of 2022, the markets have again been jittery. There has been a significant correction in the Indian stock exchanges like Nifty, and the rest of the year is expected to be volatile.

The tumultuous global political arena, aggravated by the Russia-Ukraine crisis, has also started to take a heavy toll on the market. Commodity prices are going up because of the supply chain constraints and various sanctions imposed on Russia. The Russia-Ukraine crisis is expected to impact the banking sector negatively as well.

Related: https://www.tomorrowmakers.com/stocks/6-ways-which-russia-ukraine-conflict-will-hit-global-markets-article

Besides, the expected Fed rate hikes may add to this market volatility. With high inflation, especially high crude oil prices, the Reserve Bank of India might also be forced to increase the repo rates, adding more uncertainty to the markets. The insurance premiums, including life insurance, car insurance, etc., are increasing, pushing inflation higher. 

The rising rent after a lull caused by the covid has put the spotlight back on the real estate sector. Currently, the sector is battling high cement and steel prices, apart from inflation in most of the related commodities. The auto sector, in particular, might also underperform because of the soaring crude oil prices and shortages of semiconductors. 

Thus, the expected returns on the stocks from these sectors will certainly put pressure on the markets.

Related: https://www.tomorrowmakers.com/financial-planning/how-increasing-petrol-diesel-price-may-impact-you-article

What to do?

The buy-and-hold strategy might not work in 2022. But exiting the markets entirely is never a good idea. Trading may be the best option in an unpredictable market situation caused by rising oil prices and very high inflation. A good approach would be to reduce the equity exposure for this year and add more gold and silver to the portfolio. Investing in commodity funds can also fetch better returns because of the high inflation expected this year. Additionally, you can consider investing in value funds as there are some segments that offer deep value. 

The healthcare index has also been a popular choice among investors. The sector became extremely popular amongst retail investors because of the covid crisis. With high valuations, this sector might be of particular interest. However, there are not many firms to choose from right now due to the sector's high valuations.

Related: https://www.tomorrowmakers.com/other-investments/investment-commodity-funds-know-benefits-risks-and-top-performing-funds-article

Conclusion

The year 2022 is expected to be jittery. But with the right portfolio management, this year can be profitable as well. Reducing equity exposure and increasing investments in gold, silver, commodities, and value funds might be an excellent way to make profits this year.

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