Trading the Financial Markets in 2022 – What you need to know

Despite multiple headwinds that make analysts cautious about financial markets in 2022, you should know that trading opportunities are constantly emerging this year. Both on the upside or downside, it’s possible to go long or short, benefiting from price movements. You can achieve that by using financial derivatives such as contracts for difference, which are becoming more and more popular.

However, market conditions truly are challenging, and that’s where this article aims to help. Let’s take a look at some important things you need to know, if the financial markets are drawing your attention.

Alt-text: trading financial markets in 2022

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Implications of monetary policy on asset valuations

Financial assets are influenced by monetary policy changes, mainly because the price of money (interest rates) has an impact on prices across the economy. Central banks in emerging markets have already acted on this front recently, as did those in developed nations. Except for the ECB and BoJ, major central banks are expected to pivot from an ultra-loose monetary stance.

You should be aware that such swift changes can trigger impulsive asset repricing, just like they did in January, when stocks – in particular tech-oriented names – dropped by a significant amount. Even in such an environment, there are still assets performing well, with a focus on cyclical stocks like financials, industrials and transportation.

Inflation and economic prospects

Inflation and economic growth figures should also be monitored during 2022. At present, you already know that elevated prices are a concern all around the world. Policymakers need to act and prevent inflation from becoming entranced.

At the same time, they also need to act carefully, so as not to hinder economic activity. Navigating such a fine line is difficult, which is why financial assets will probably remain volatile. Thankfully, with CFD trading you can benefit from short-term price movements. Long-term investors might have a hard time finding opportunities, as markets can swing on both sides.

Commodities and global trade

Market participants are increasingly looking towards commodity prices, since this market is one of the main reasons behind current elevated prices. You should constantly monitor the price of oil, natural gas, and even agricultural commodities (corn, soybeans, etc.), because that way you can have an overall picture of how price pressures can evolve in the future.

Also, supply chain bottlenecks remain a concern, especially with the latest Coronavirus variant Omicron in mind, carrying higher transmissibility. Mitigation measures imposed in large exporting countries, such as China, can influence global trade, and thus keep price pressures elevated for longer than expected.

Bottom line

If you are a beginner trader, you should start off by understanding basic market principles before analyzing the variables stated in this article. Your trading strategy should be built around these concepts: monetary policy, inflation, commodities, and global trade. They can truly influence asset prices.

Although there are multiple variables to monitor, ultimately your goal is to succeed while trading. This is quite challenging, so make sure you are well-informed and prepared to make the right calls.