Ever since the end of Q1 2020, numerous assets and sectors have managed to outperform, mainly due to the effect of the pandemic,. generating impressive returns for investors and traders. Ultra loose monetary policies and fiscal support were major tailwinds, but as this framework is changing, due to high inflation and strong economic growth, experts are starting to question whether these assets can continue their run higher in 2022.
Tech stocks
One of the most popular sectors among investors is tech and this has been a popular ‘place of refuge’ for funds during low interest rate periods ever since the 2008 financial crisis. Investors treat tech names like long-maturity bonds, mainly because these companies generate strong revenues, can make buybacks, and also borrow at low rates.
Companies like Apple, Tesla, Microsoft, and Amazon have been in high demand recently, but as interest rates pick up and central banks remove stimuli, there are already signs of peaking in the horizon. QQQ, one of the most popular tech ETFs in recent times, is trading in negative territory ever since 2022 started, with more downside expected in the next few weeks and months.
Cryptocurrencies
Even more volatile and impulsive has been the cryptocurrency bubble. The global market cap is currently around $2 trillion, but it was close to breaching the $3 trillion mark in November 2021. Although there is a whole lot of interest in digital assets, not only from retail users but also from institutional investors, the technical picture is not looking good, which is why experts believe the industry is bound for a larger drawdown this year.
How can traders protect themselves?
In such a challenging environment, market participants need to look for ways to protect themselves. Bearish moves are more violent in nature because selling is generally driven by fear. One of the first steps one can take is to make sure that there are enough trading tools at their disposal, so prices can be analyzed from different perspectives.
TRADE.com is a broker that does a lot to reduce risk for traders, by providing access to advanced trading software as well as to TradingView, the popular charting service. It’s a lot more convenient to trade when prices are moving up, and more challenging when a bullish trend becomes unstable, leading to sharper corrections and sometimes even bear markets, but TRADE.coms’ tools do their share to negate that.
TRADE.com employs a professional approach, covering a wide range of CFDs, thus ensuring its customers can diversify and spot the right assets to trade on. At the same time, the use of risk management tools is possible via all of the platforms covered, so traders can keep exposure under control, even when they are not at their desks.
During the start of 2022, stocks such as Tesla have been volatile, making it difficult to find accurate entry points. Traders with limited experience are generally the most vulnerable to losses when situations like this occur, which is why TRADE.com facilitates access to plenty of educational resources.
Ultimately, bull markets will end and bubbles bursting can provide new trade opportunities for those who are willing to take risks and use professional rules-based trading methods. 2022 is bound to be another volatile year for financial markets, but experts predict that it will be difficult to post the same strong gains as we’ve witnessed in the past two years.
Disclaimer: This content does not necessarily represent the views of IWB.