The year 2022 has begun unlike anyone had anticipated: at the precipice of World War III. An escalation between Russia and Ukraine and related economic sanctions have caused historical volatility and fear in financial markets. It arrives while the pandemic is still not entirely under control, and the lingering impact it had on supply chains and logistics is nowhere near subsiding.
The situation has dealt a crippling blow to global stock markets as investors brace for the potential business impact war and related economic turmoil can have. At the same time, important geopolitical commodities like oil are skyrocketing in value.
Gains in gold have also grown steady as investors move capital into known safe havens during such times of uncertainty or during periods of high inflation. Meanwhile, the highly volatile cryptocurrency market has recently decoupled from stocks and received newfound interest from oligarchs seeking to avoid economic sanctions and supporters of both sides looking to donate to the cause. However, their previous performance tied to stocks continues to make them a high-risk investment class.
With so much going on across financial markets globally, how will traders survive in the year 2022? Here is more info to help you trade your way through the unprecedented turbulent times.
Go For The Gold
Precious metals tend to perform while other assets struggle. They do well even during recessions, making them a flight to safety for investors of any size. Because gold is an international and borderless commodity and asset, it plays a critical geopolitical role globally. Most countries turn to it as a reserve asset outside of their own currency or the global reserve, USD. When any of these currencies are under pressure, gold is the place to be instead.
Gold’s use as a monetary asset dates back ages and remains the hard money standard. Most national currencies were once pegged to the price of gold. Today, fiat currencies are essentially printed out of thin air by creating debt. The situation, in turn, causes inflation, which gold traditionally has been used to combat. With inflation rates as high as 7.5% already, gold is once again becoming the de facto choice for investors to protect their hard earned capital.
The shiny yellow metal also tends to perform best during times of uncertainty. Gold rises around major political events such as US Presidential elections or Brexit, for example. Its recent climb began with the trade war between US and China. And it is once again performing positively with the situation growing more severe across Europe.
A Shaky Stock Market
Although the Fed’s ultra lax monetary policy post-pandemic allowed the stock market to flourish, looming rate hikes cut down recent gains and might have put a pause on performance for some time. News of the war further turned markets fearful, hitting emerging markets particularly hard.
Additional monetary easing could be warranted if the economy suffers further from ongoing war and sanctions, forcing the Fed’s hand during a time when inflation is already dangerously high. The Fed may need to stave off rate hikes instead without further monetary expansion, and the uncertainty will make for a rocky few quarters in the stock market. If the conflict in Europe subsides sooner than expected, rate hikes may develop as currently planned.
Simply put, the risk surrounding the stock market could keep performance at bay for most of 2022. More dynamic returns may not materialize until well into 2023, and with the current state of the economy, anything is possible.
Demand For Commodities
Certain restrictions surrounding the pandemic are finally being lifted, and with war taking over the headlines, the media is no longer pushing panic over COVID. But its damaging effects on supply chains and logistics continue to threaten the monetary system with frightening inflation. It has also put pressure on strategically important geopolitical assets that are already scarce and in steady demand.
Already weak supply in the face of high demand and fear of price inflation is pulling up energy prices sharply. Natural gas and oil have benefited enormously but are now at historic highs. Although they are considered the “hot commodities” at the moment, getting into oil this close to resistance could be a dangerous move. Several countries are close to deploying extensive measures to rescue their citizens from the strain high prices put on their pockets.
If and when the situation surrounding Ukraine and Russia begins to stabilize, and Iran unlocks some supply to the world, energy prices should correct and return closer to normal. If, for some reason, the situation turns tenser, oil prices could reach new record levels.
Make It Or Break It Moment For Bitcoin
Things are getting interesting for Bitcoin and cryptocurrencies. Bitcoin itself has been pitched as the best chance for fighting against inflation due to its hard-capped supply of just 21 million BTC and attributes that make it similar to digital gold. Yet the asset has struggled severely during the worst inflation in decades. Gold is performing well, so safe-haven assets aren’t the problem.
An ongoing correlation between crypto and the stock market helped propel Bitcoin and other coins into stardom during the post-pandemic stock market surge, but it has hurt cryptocurrencies since. The speculative asset class was once pitched as an uncorrelated asset class but has been stuck with a high correlation to stocks over the last two years. Investors panic sell cryptocurrencies at the first sign of weakness or fear in markets, making them even more volatile than stocks.
However, big players who missed the boat on the way up in crypto appear to be buying each dip, suggesting a deeper bullish trend has not entirely been broken. Bitcoin has also surprisingly surged in recent days as volumes in local Russian, and Ukrainian currencies reached the highest levels ever. Everyone from local supporters to wealthy oligarchs looking to skate sanctions might buy the asset, making the situation less clear. Cryptocurrencies could show better performance than the stock market but will perform best when risk appetite fully returns, and the stock market and crypto grow in tandem again.
How To Trade During Turbulent Times With PrimeXBT
Although there are clearly many critical challenges putting pressure on the economy, financial markets, and investors themselves, there are also plenty of once-in-a-lifetime opportunities as a result. In the current environment, buying cheaper assets becomes attractive but still risky given the situation globally and the weight of all factors combined. Rather than take on more risk than necessary, traders can strategically hedge against risk by using a combination of long and short positions on a variety of assets.
On the award-winning margin trading platform PrimeXBT, traders can open long and short positions with leverage on more than 100 different trading instruments for complete control over their portfolio and protect assets from risks when necessary. Margin trading also enables lower risk by allowing traders to put less capital on the line while still taking maximum advantage of the current market conditions and volatility. Trading with larger position sizes that require less capital is a safer way to tread carefully.
For those that are too fearful at the moment to enter positions yourselves or simply don’t have what it takes to survive these volatile times, there is always the Covesting copy trading module. The Covesting copy trading module connects followers with traders who regularly show stand-out success via transparent global leaderboards. Only with PrimeXBT and Covesting can followers copy the trades of more experienced traders and profit from those who not only know how to survive in these times –– but know how to thrive in them.
