What’s the best investment you can make in 2022?

As a new year starts, the question that many ask is: “Where is it best to invest this year?”

The answer, predictably, is not obvious and cannot be immediate.
The current scenario must be analyzed together with the ongoing trends and possible/probable events.
For the sake of clarity, let’s premise that the best 2022 investment is not necessarily the one that will earn the highest returns at year end (which are unpredictable at the beginning of the year), but the one that will generate good/excellent returns, perhaps predictable, minimizing investor’s risks and protecting him from volatility and shocks.

During this analysis we will compare:

• Investments in real economy

• Investments in financial markets (shares, bonds and raw materials)

• Real estate investments

The economic and financial environment in which to choose the best investment of 2022

On a macroeconomic level, some trends already underway and some probable phenomena should be kept in mind:

• In 2021 the world economy has already run way faster than expected, causing unexpected increases in the cost of raw materials and semi-finished products, energy costs, and costs related to the transport of goods;

  Financial markets have run much faster than the real economy – e.g., US GDP +8% S&P500 +27%, Nasdaq +21.4%, DOW +18.7%;

  The concatenation of these two phenomena has generated – in the United States, Europe and many other economies – more inflation than expected. At first, it was considered "transitory" and later "no longer transitory";

• Inflation has taken on a very different meaning in different parts of the world. In the United States, it has increased salaries, bringing the average wage above 30 dollars per hour. In Europe, on the other hand, where salaries have remained mostly unchanged, companies perceived margin pressure and citizens experienced a loss of purchasing power. Also worthy of note is the case of Brazil, where inflation has exceeded 10% also due to the depreciation of the exchange rate and adverse weather conditions;

• Throughout the year, central banks continued to help their economies by keeping rates low, printing money (e.g., buying government and corporate bonds) and directly helping businesses and citizens;

​Possible scenarios and sources of shocks to be considered when choosing the best 2022 investment.

The policy of the Central Banks will play a significant role. After years of being aligned, the main issuing banks have decided to follow different paths and this is the first time this has happened in a long time:

• FED has announced at least 3 upturns to cool the inflation run, which may be even "higher than expected" if it continues to gallop;

• ECB, on the other hand, believes they still have to continue to help the Old Continent’s economies, so a substantial increase in rates and a stranglehold on liquidity is rather unlikely. However, interventions will be less substantial than in previous years;

• In the Evergrande case, China has shown its intention to directly help its domestic economy, therefore, it is likely that through its Central Bank it will offer companies all the necessary liquidity and, possibly, this attitude will be followed by other developing economies;

Real economy, financial markets or real estate: which is the best investment of 2022?

Due to the economic trends already underway and the policies announced, we can draw some considerations.

The real economy will not be the best investment of 2022.

In most Countries, 2022 GDP growth forecasts are lower than the growth experienced in 2021. Furthermore, on the real economy some factors intersects and outline a (dramatically) perfect storm wherewith every company has to deal with:

• Raw materials and semiconductors hardly available and with skyrocketing prices;

• Never so high energy costs;

• Need to revise many value chains;

• Possibility of new COVID-19 variants, new restrictions and return of lockdowns;

• Difficulty in finding professional figures wanted;

The best 2022 investment is unlikely to be in financial markets.

Shares, as we have seen, have already raced a lot last year and, although there have been opportunities to retrace, the values are still very high. Emblematic is the case of Tesla, which has reached $1,000 billion in capitalization. What was the driving force behind this rally? In part, the economic outlook for 2021, clearly better than those for 2020 and, partly, the liquidity offered by central banks since the beginning of the pandemic.

If the equity market seems destined to grow less or to retrace, bond market’s values are destined to fall due to the cutting of economic supports, on the contrary, yields (currently very low) are destined to grow.

Similar is the fate of raw materials that have reached record values, which will have to come down sooner or later.

Can real estate be the best 2022 investment?

In 2021 the real estate sector has been surprising for its vitality with different dynamics from country to country, due to the specific features of each market.

For instance, the U.S. inventory shortage took on dramatic characteristics in front of the exploding demand of 2020. The number of purchases and sales collapsed in the spring of 2021 when there were literally no more houses for sale. It experienced a recovery between November and December, reaching the levels of late 2020. This dynamic could only lead to strong pressure on prices (+14.1% for new houses, +14.6% for existing houses).

Why U.S. income properties are among the best investments of 2022.

Among all of the sub-segments of real estate, in the United States, income properties (i.e., purchased as an investment and rented to tenants who live in it) offer a number of features that make it one of the best 2022 investments, probably the best investment of all:

• Predictable income, determined by the market value of the rental property;

• Yield pushed up by rising wages for U.S. citizens (currently +3.3% with forecasts for further growth);

• Market value of real estate destined to revalue over time, as evidenced by the data expressed in a recent research NAR® – National Association of Realtors® that indicate a +5.7% for the next year, a more gradual increase compared to 2021 that therefore appears more sustainable and structural;

• High liquidity of the investment, as the ratio of low inventory to high demand typical of the U.S. residential market will not change substantially, according to experts, thus keeping resale very dynamic (currently a property sells on average in 53.5 days, a figure that touched 35.5 days during the last spring selling season in June 2021);

• Probable revaluation of the dollar (and depreciation of other currencies) due to the FED raising rates;

If you would like to evaluate this kind of investment, you can visit the Invest in the USA page of the OPISAS website, write an email to contact@opisas.com and make an appointment with a consultant, an expert in real estate investments in the U.S. market.