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Investment Outlook 2022

How to make the most of your money in 2022

Although the global economy is set to grow in 2022, the world continues to face many challenges, not least the new Omicron Covid variant. The pandemic has shown there are some things we can’t control but, when it comes to personal finance, there are some potential pinch points you can keep an eye on to help you manage your money. 

What’s going to affect you in the year ahead?

Counting the cost of the weekly shop

The cost of living rose at its quickest rate in a decade in late 2021. This is because of inflation, which is now hovering above 5%.

From clothes shopping to eating out, things are getting more expensive: Petrol is now at record highs, while energy costs have leapt due to a 50% surge in wholesale fuel costs.

Low interest rates means the purchasing power of cash is declining

While the return on your savings can rise with interest rates, these are currently less than the rate of inflation – by quite a lot.

Following a rate rise to 0.25% in December 2021, the Bank of England will almost certainly make further rate increases in 2022. However, these will likely remain within historic low levels – i.e. beneath 2%  – so well below Bank of England inflation predictions of 5%.

What does this mean for house prices and mortgages?

It’s good news for property owners but perhaps less so if you’re looking to buy. House prices continued to rise through 2021, (by more than 11%) meaning average house prices in the UK have increased by over £30,000 since the start of the pandemic.

This growth should continue into 2022, though probably at a lower rate and will differ across the country. London was actually the region with the lowest annual growth (2.8%). In Scotland, Midlothian had the highest levels of growth (20.3%) while the City of Edinburgh continues to hold the highest average unit price.

Many experts expect interest rate rises could impact those who have variable rate mortgages, although most people in the UK are on fixed rate mortgages which should help protect them from any rise. 

The UK economy is bouncing back

The global economic recovery is well underway and looks set to continue into 2022, if at a slightly slower rate. Nonetheless, UK GDP is on track to return to its pre-Covid levels in the first quarter of 2022 and as the recovery continues through the year, wages should rise in line with inflation. 

Making your money work for you in 2022

The current level of inflation could eat away at the purchasing power of your savings. Therefore, in 2022, investing could be a good way of managing your wealth and taking advantage of the potential for a post-pandemic recovery.

Why investing can be a good idea

Gaining from growth

Investing in shares of companies or ‘equity’, could be seen as an investment in the potential for growth. While no investment is without risk, historically, equity markets (like the FTSE 100) have delivered good returns. 

Long-term returns

By leaving your money invested over time, any growth you make is reinvested in the market and this could multiply over time. Equity markets can, of course, fall as well as rise. So, by balancing your investments with other assets such as bonds, you could reduce the risk of a market downturn.

Global opportunities

Our investments are managed by Coutts investment managers who constantly monitor markets across the world, aiming to ensure they are well placed to take advantage of opportunities and to avoid undue risk. 

The return of an index of global equity markets (MSCI World) over the last 40 years in GBP terms. Chart shows value overtime of £100 invested in November 1981. Gross of any fees. Source: Bloomberg/Coutts. Past performance is not an indicator of future performance and you may get back less than you initially invested.

How to make the most of your Investments

No matter what stage you are at in your life, level of knowledge you have, or amount you want to invest, there are options for everyone. 

Pick what’s right for you

You can start online from just £50 and choose a fund that works towards your investment risk appetite and goal.

Invest for the long haul

By investing what you can afford on a regular basis and leaving it for the longest possible time, you’re able to give your money the best chance to grow.

Invest sustainably 

When you invest, you could be helping the planet because we invest in companies and industries with sustainability targets.

Already a Premier investor? 

Review your existing investments and explore opportunities for 2022. 

Get started on your investment path in 2022

We’ve created Royal Bank Invest to make investing online easy. Start investing from £50. 

Specialist advice from our Wealth Managers

For customers who want specialist investment advice, and can invest £250,000 or more, our face-to-face advice service is available. 

Trends to watch in 2022

Coutts award-winning asset management team have detailed a few areas to keep an eye on in 2022.

1. Governments trying to manage inflation 

  • Increasingly, companies are signalling that inflation is a problem and passing on their increased costs to consumers, fuelling inflation, which is likely to reach 5-7% in the UK and US.
  • Central banks such as the Bank of England and the Federal Reserve in the US are facing a tricky balancing act between curbing inflation and encouraging post-pandemic growth. To manage inflation we’re likely to see them ‘tighten’ monetary policy by raising interest rates, while governments also wind down their pandemic stimulus programmes.
  • This could make borrowing more expensive for individuals and companies, however these decisions on interest rates by central banks will be taken with the expectation that economic growth will continue to be strong throughout 2022 – a view we share.  

2. Climate change front and centre for investors

  • Following the commitments made at COP26, we are expecting governments in 2022 to come out with increased regulations and standards on reducing emissions between now and 2025. This will likely impact companies, their revenues and ultimately their valuations.
  • So, it’s more important than ever to incorporate the transition to net zero into the investment process to help you take advantage of new opportunities and manage risk. That is exactly what we’ve done.
  • Our investments are made with a net zero carbon emissions goal in mind and we deliberately avoid certain sectors and companies which we believe might jeopardise that goal. We’re also proactive shareholders for all our investors, voting to create real sustainability and social benefit from how companies are run. 

3. Markets still set to grow

  • Markets are following strong recovery growth in 2021 and the UK is expected to rise above its pre-Covid level GDP in 2022.
  • However, the impact of a new Covid variant in Omicron may be cause for some uncertainty as governments and businesses work out the best way to continue supporting economic growth.
  • One sector we are watching is healthcare, which we believe will do well in an aging population and which has strong long-term fundamentals.

Anything else we can help you with?