MARKET OUTLOOK:

The year 2022 will probably be the year of inflation bifurcation. Some products and services will continue to rise in price at a rapid rate and others will probably rise moderately or decline. 

Loose monetary policies and government stimulus, combined with supply bottle necks, pushed inflation higher in 2021. The price of almost all goods and services increased. 

In 2022, government stimulus will be dramatically reduced and at the same time, central banks are planning on tightening monetary policy. With less money in the system, consumers are going to have trouble affording luxury items as they spend more money on higher priced necessities. 

In 2022, companies that specialize in luxury items will probably struggle. Companies that are able to pass on their higher costs are expected to do relatively well. Seasonally, investors often “switch horses” or sectors of the market in January as they position themselves for the new year. Look for a lot of sector rotation in January. The stock market is a forward-looking mechanism. 

Look for the stock market to perform well sometime early in the new year as the Omicron wave starts to recede or the number of deaths is lower than expected. If and when this happens, we could see a mini-reopening boom that could provide a burst of performance to some of the cyclical sectors of the stock market.

TOP PICKS:

BMO Equal Weight Banks Index ETF (ZEB TSX)
The Canadian banking sector has a strong seasonal period from January 23 to April 13. The sector has been performing well after its full-year earnings results were released recently. Look for the sector to perform relatively well if the stock market starts to become volatile.

VanEck Vectors Gold Miners ETF (GDX NYSE)
Gold miners have a strong seasonal period from December 23 to February 14 and can continue to perform well into March and April. Investors have shied away from the gold miners sector in 2021 and the sector is close to its 2021 low. Technically, the sector is well poised to perform well over the next two to three months.

First Majestic Silver Corp (FR TSX)
First Majestic has a strong seasonal period from December 27 to February 22. Recently, First Majestic has shown signs of stronger performance, just as it is about to enter into its strong seasonal period.

PAST PICKS: May 5, 2021

Health Care Select Sector SPDR Fund (XLV NASD) 

• Then: $123.06
• Now: $138.82
• Return: 13%
• Total Return: 14%

Consumer Staples Select Sector SPDR Fund (XLP NASD)

• Then: $69.74
• Now: $75.30
• Return: 8%
• Total Return: 10%

iShares 7-10 Year Treasury Bond ETF (IEF NASD) 

• Then: $114.40
• Now: $115.39
• Return: 1%
• Total Return: 1%

Total Return Average: 8%