The United States’ investment landscape is an interwoven network of three integral components. Investors’ goals and resources, potential investment targets, and external economic factors all play key roles in investment decisions. Successful entrepreneur and investor Steph Korey, who consistently executes angel/early-stage investments, emphasizes the importance of staying advised of current and projected investment trends.
5 Investment Trends to Watch in 2022
Every investment decision should involve exhaustive market analysis and intensive due diligence. Steph Korey highlights five projected 2022 investment trends that could affect individual investors’ strategies along with the financial markets as a whole. The Forbes December 30, 2021 edition detailed each prediction’s origin and significance.
The evolving COVID-19 pandemic has upended many sectors of the United States economy. Pandemic-related lockdowns dealt the retail and travel segments an especially hard blow, although few companies in any industry were unaffected.
Market forecasters hope that 2022 brings a higher degree of normalcy. In turn, this could help retail, travel, and commercial real estate stocks to continue their ongoing recoveries. Other economic sectors could also benefit from the United States’ gradual emergence from the pandemic’s grip.
However, the 2021 emergence of the Delta and Omicron variants has renewed concerns about virus case surges and subsequent lockdowns. Discussion about additional variants is also taking place in some medical circles.
From an investment perspective, Forbes says that although the pandemic rolls on, investors should understand that the financial markets are already experiencing a post-COVID rally. This is because the stock markets have probably priced in most gains from a completely reopened United States economy.
The Federal Reserve Will Likely Hike Interest Rates
When the Federal Reserve maintains low-interest rates, stocks tend to do well overall. The Fed has adhered to a zero-interest-rate policy for some time. According to the CME Group’s FedWatch Tool, however, the Fed will likely increase interest rates at least twice in 2022. The Fed’s decision will hinge on traders’ speculation in the futures market.
Since early 2020, extremely low-interest rates and the Fed’s quantitative easing policy have collectively kept stocks on the upswing. However, if the economy experiences more negative impacts, the Fed could further regulate its monetary policy. Stocks do not typically respond well to these developments.
Inflation May Become a Serious Concern
Throughout 2021, inflation became an increasing drag on the United States economy. Many consumer items saw significant price hikes, and every trip to the grocery store brought more sticker shock. Gas prices also rose steadily throughout the year. Inflation is projected to continue in 2022, and it could lead to even greater economic difficulties.
Not surprisingly, concern about inflation’s market impacts is building in high-level financial circles. If inflation does not begin to moderate in the near future, the financial markets could be thrown into disarray. This could set the stage for an overall market downturn.
Frustrating Supply Chain Challenges Will Continue
Much of the United States’ supply chain experienced significant shortages in 2021. At the grocery store, many shelves had sparse product choices, and some sections were wiped completely clean. Big box retailers and neighborhood stores alike were affected by this nationwide problem.
Many manufacturers reduced their output, and some even shut down production lines, because of scarce component availability. The healthcare industry was also affected, with medical supplies and prescription drug shortages popping up everywhere. Few segments of the United States economy escaped supply chain shortages’ effects.
Finding the source of the supply chain problems was not a difficult task. Numerous container ships sat at anchor off United States ports as unloading backlogs stretched on for weeks. Once products reached dry land, they were again delayed as a shortage of tractor-trailer drivers meant longer delivery times. Each additional delay compounded the problems for consumers.
In early 2022, all indicators point to continued supply chain obstacles. The ongoing pandemic developments are further complicating the issue. If this prediction plays out, the financial markets will not respond positively to this trend.
However, the United States’ ongoing supply chain problems have focused attention on another serious concern. Because of cheaper labor costs, many American companies have outsourced their production to overseas businesses.
Other American firms purchase products from offshore suppliers to reap similar economic benefits. The current supply chain issues have caused some businesses to rethink this product acquisition approach.
Widespread Computer Chip Shortages Will Drag On
Prolonged computer chip shortages have impacted many consumer goods manufacturers. Automakers frequently have widespread production backlogs as almost-finished vehicles wait for computer chips that control integral functions. The production of personal computers, televisions, appliances, mobile phones, and other devices has also been impacted by the scarcity of tiny computer chips.
Global chip manufacturer Intel predicts that the computer chip shortages will extend into 2023. This could affect the market positions of consumer goods manufacturers that cannot complete production runs without these sophisticated devices.
US Midterm Elections Will Create Uncertainty for Investors
The 2022 midterm Congressional elections could have a yet-to-be-determined effect on the financial markets. Traditionally, the current president’s party loses seats in this election, although that result is not guaranteed.
Both Democrats and Republicans have committed bases and strong opinions. This could lead to unpredictable events surrounding the midterm elections. Any unfortunate outcomes could cause anxiety for financial markets and investors.
Steph Korey Lays the Groundwork for New Investors
Getting involved in the investment arena can be an exciting prospect. The development of new technologies, applications, and markets creates an ever-evolving array of potential investment opportunities. The idea of participating in a ground-breaking medical discovery or technological breakthrough is appealing on several levels.
However, each investment decision comes with a degree of uncertainty. Stated another way, investors are not guaranteed to recoup their principal, much less earn a good return. A reputable investment advisor can provide targeted guidance on this frequently unpredictable journey.
Find a Qualified Investment Advisor
While trying to develop an investment goal and a strategy to accomplish it, a new investor will likely be deluged with marketing solicitations. Some investment consultants have earned respected financial designations that require intensive coursework, exam completion, and extensive experience in the field. Recognized experts include a Certified Financial Planner (or CFP) or Chartered Financial Consultant (or ChFC), among others.
However, other financial consultants may not have demonstrated a commitment to establishing themselves as an authoritative source. Additionally, certain advisors operate with a compensation structure that may not always keep the investor’s best interest at the forefront of every investment decision.
To minimize the chances of miscommunications about investment goals and strategies, investor Steph Korey recommends that new investors perform thorough due diligence on all financial consultant candidates. Reputable financial professionals will be happy to provide references from satisfied clients.
Complete Pre-investment Checklist Items
Before jumping onto the investment bandwagon, new investors should ensure their financial readiness for this up-and-down experience. Steph Korey outlines three important steps in this sometimes-overlooked process.
Before serious involvement in the financial markets, each investor should set aside at least six months of living expenses (or an emergency fund). Although an accessible savings account is a viable option, the investor should avoid raiding their emergency fund for routine expenses. If funds are available, contributing to an employer-driven 401(k) is also a good idea.
Eliminate High-interest Personal Debt
Each investor can potentially lose part (or all) of their investment principal. Therefore, they should ensure that they have paid off their high-interest debt before putting their hard-earned dollars into the financial markets.
If an investor has credit card balances and/or loans that carry a 10% (or higher) APR, they should retire those debts first. Otherwise, their market gains will be canceled out by the debt interest.
Establish a Consistent Investment Schedule
After successfully stockpiling six months of living expenses, the investor should objectively evaluate their budget and note their discretionary income. Next, they should determine how much they can realistically invest each period. Finally, the investor should take steps to put that plan into action.
Recognize the Value of Failure
Regardless of their investment specifics, every investor would like to make an attractive return on their principal. However, the “win some, lose some” philosophy accurately applies to the investment industry.
For any investment, an investor could potentially make a profit, or they could lose some (or all) of their principal. Although this is certainly a suboptimal outcome, Steph Korey reflects on the value of embracing failure in any business undertaking.
First, the failure to achieve the desired result provides a good opportunity to step back and re-examine the situation. If the investor made a miscalculation, or they incorrectly read the market, they can develop an improved perspective that can help them to achieve a better result the next time.
In addition, weathering day-to-day failures can pave the way for successful future investments. More effective risk management may lead to a willingness to accept bigger risks (and potentially bigger rewards).
About Steph Korey
Accomplished angel/early-stage investor Steph Korey combines an entrepreneurial spirit with a rich multicultural upbringing. Born in Ohio to a Romanian mother and a Lebanese father, Korey often visited relatives in Europe and the Middle East during her childhood.
These experiences helped to fuel her interest in cross-cultural collaboration. With this focus, she obtained a Bachelor of Arts in International Relations from Brown University.
Direct-to-consumer Marketing Skills Development
After working in conflict resolution at the Atlanta-based Carter Center, Steph Korey excelled as Head of Supply Chain at Warby Parker, an eyeglasses eCommerce firm. Leading a high-performing group tasked with product creation and distribution, she saw firsthand what a powerful team could do.
Steph Korey’s Warby Parker achievements inspired her to earn an MBA at Columbia Business School. While pursuing her studies, she handled merchandise strategy consulting duties for Casper, a rapidly growing direct-to-consumer (or DTC) mattress company.
Through Korey’s Warby Parker and Casper experiences, she learned how a well-executed DTC model could enable a brand to sell an upscale product directly to end-users. She also gained an appreciation for the role that effective storytelling can play in product distribution.
In 2015, Korey applied her management skills and business expertise to the co-founding of Away, a growing global lifestyle brand. While serving in a leadership role, the company raised $156M and was given a $1.4B valuation. On two occasions during her tenure, Fast Company voted Away one of its Most Innovative Companies.
Focus on Angel/Early-stage Investments
Today, Steph Korey revels in her role as an angel/early-stage investor. Living in New York City, she continues to receive exposure to multiple investment opportunities.
Korey often supports entrepreneurs who might not qualify for other funding opportunities. She expresses confidence that, over time, her funding and mentorship efforts will help to facilitate each company’s progress forward.
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