If you had GameStop (NYSE:GME) on your bingo card of stocks that would outperform the market in 2021, you probably wouldn’t get much from this article. However, as 2021 showed us, there’s no such thing as a sure thing.
Electric vehicle (EV) stocks were supercharged but have fizzled along with the broader tech sector. Few investors could have predicted the meme stock movement and how it has continued to be a story in 2021 as part of the rise of the retail investor.
And how about the “recovery” stocks. Airlines, cruise lines, and hotels; each of these sectors have faced an uneven growth narrative as the COVID-19 pandemic continues to disrupt a smooth economic recovery.
With that said, stocks are still the place for growth investors, mainly since inflation is likely to remain at near-record levels for much of the years. And several sectors stand out for various reasons.
We believe three sectors have strong catalysts that make them essential sectors to invest in for 2022.
Financials
As inflation rose in 2021, the Federal Reserve changed the “if” around a shift in monetary policy to “when.” But for most of the year, they hadn’t given investors any dates to rally around. That changed in December.
Now the market knows that the Fed’s tapering program is likely to end in the early Spring. And sometime after that, a series of interest rate increases will be on tap.
That means the financial sector should profit if for no reason other than a steepening of the yield curve.
When long-term rates rise faster than short-term rates, banks will be able to charge more on loans than what they pay to borrow.
And there’s some sentiment that the market is not correctly pricing in the industry’s shift from a brick-and-mortar to a digital model.
With that said, quality matters, and it’s hard to ignore JP Morgan Chase (NYSE:JPM). However, big banks may not gain as much as regional banks.
And that’s why opportunistic investors may want to look at Truist Financial (NYSE:TFC), which recently acquired SunTrust Bank and BB&T Bank.
This expands the bank’s footprint in areas of the country that, to date, have been less affected by pandemic mitigation measures.
Energy
Energy stocks will continue to have momentum in 2022. Some analysts predict that the average price of gasoline in the United States will climb to $4 a gallon by Memorial Day.
If that’s the case, then investors would do well to consider moving into traditional oil and gas stocks.
And it’s equally important for investors to stick with clean, green energy companies. This is a narrative that’s been playing out for over ten years.
And despite the gridlock that is slowing down and may scale back the Biden administration’s push to increase spending on climate change, this is the direction that the United States is embracing.
With that in mind, investors would be well-served to look at companies as part of this “both-and” narrative. And one of the stocks that we like for that reason is Chevron (NYSE:CVX).
The company is firmly entrenched in both traditional and alternative energy programs. And the Dividend Aristocrat pays out a dividend with a yield that can stand up to inflation.
Semiconductors
The supply chain disruption is showing signs of easing. But that doesn’t mean that the supply/demand imbalance will be resolved anytime soon.
Notoriously cyclical semiconductor stocks have enjoyed an extended bull market that will carry through much of 2022.
Some analysts are preaching caution for semiconductor stocks and big tech stocks in general. However, this is a sector to embrace, not avoid.
And if you’re looking for quality names, few resonate more than Nvidia (NASDAQ:NVDA).
Simply put, Nvidia supplies chips for the fastest growing niches in technology such as cloud computing, artificial intelligence, the internet of things, gaming, and mobile computing.