“5 Investing Resolutions for 2022” with faded stock charts in the background and “Weekly Viewpoint” in the top left corner

2021 has been a wild ride.

As investors, we learned a lot.

Some of the highlights were realizing the power social media has over the stock market, understanding the Fed holds the cards, and accepting crypto isn’t going away. As humans, we learned to survive another year of the pandemic, open the conversation about money and not let politics ruin our day. As life slows down over the next few weeks, it can be a great time to reflect on the things you learned and build a game plan for the upcoming year, especially when it comes to investing.

Here are my top five investing resolutions for 2022.

Graph titled Meme Stocks Take Off tracks GameStop and AMC price performance from January through December 2021. Both AMC and GameStop saw spikes in January. GameStop spiked to gain nearly 1,700% before dropping back down and rising again in spring. Since then, the gain has generally hovered between about 700% and 1,200%. AMC saw a smaller spike in January. Its major spike came in summer, when it rose to over 2,700%. It has since fluctuated between about 1,200% and 2,500% during the rest of the year. Source: Ally Invest, S&P Capital IQ

1. Don’t underestimate social media’s impact.

An unusual phenomenon took the market by storm in January: meme stock trading. GameStop and a Reddit account called Roaring Kitty quickly became the poster children for the movement. Everyday traders pushed GameStop’s stock price from $20 to $350 in a matter of two weeks and forced Wall Street traders who were betting the stock would decline to close their positions for a loss.

It’s been an eventful year for meme stocks, which include AMC, BlackBerry and Bed Bath & Beyond, among others. The WFH environment made it easy for day traders to keep a close eye on the minute-by-minute moves in these stocks. Some made lots of money, others lost. The lesson learned was twofold: day trading is hard, and sources of research and information are changing as fast as these stocks moved.

2. Don’t fight the Fed.

It’s a lesson we learned in 2020 and were constantly reminded of this year. The Federal Reserve Board’s job is challenging, as they are constantly trying to be in lockstep with the economic trends without rocking markets too significantly. Swift actions taken by the Fed and other central banks around the world arguably saved the global economy from a more protracted recession.

With the U.S. on stable ground, the Fed is now in the process of figuring out how to best return monetary policy to a normalized path. That means eventually raising interest rates. The market is betting the Fed’s first hike in rates will happen in the spring of 2022. While the market doesn’t particularly like this change, it is a sign the economy is gaining strength and moving further past the healing stage. The good news is small, gradual rate hikes rarely upset economic growth. That creates an environment in which stocks can continue to perform well.

3. Count on the crypto craze to continue.

Bitcoin got all the attention when it came to cryptocurrencies for a very long time. Nowadays, there seems to be a new coin popping up every day. Volatility in Bitcoin and other cryptocurrencies, the IPO of Coinbase, and a boost from meme cryptocurrencies (pick your poison — Dogecoin, Shiba Inu, Dogs of Elon, etc.) caught investors’ attention. Now, financial institutions are building infrastructure to support the coins, payment companies offer crypto on their platforms, and more retailers are accepting it as tender. Tesla even bought some Bitcoin to maximize returns on its cash.

While investing in the coins directly, or through Bitcoin trusts, has been around for several years, in late 2021, Bitcoin and crypto ETFs, Bitcoin futures ETFs and indices hit the scene. Investing in cryptocurrencies has become more widely available and cheaper for retail investors. Demand for the crypto ecosystem, including the blockchain, is likely to continue to increase in the years ahead. However, volatility can remain high as usability, security and adoption is proven out.

4. Don’t get caught in IPO hype.

It’s been a hot year for IPOs. According to FactSet, through the third quarter, there have been more IPOs on U.S. exchanges than any other year since 1995. Big brand name companies, like Bumble, Oatly and Lucid Motors (through a SPAC) made their debut this year. Despite all the excitement and hype, the IPO market hasn’t performed well. The Renaissance IPO ETF is down almost 10% year-to-date, while the S&P 500 is 25% higher over the same time period.

Graph titled IPO Bust tracks the Renaissance IPO ETF during 2021. While the ETF saw a rise in February (up to about $76), it was down to the mid-$50s in May. It rose again in the third and fourth quarters (into the $60s), but year-to-date, it is down -9.6%. Source: Ally Invest, S&P Capital IQ

This isn’t a new trend. About half of U.S.-based stocks that went public from 2015 to 2019 were trading below their IPO prices a year later. Honestly, it’s difficult to tell which IPOs will be booms or busts. Private companies typically don’t disclose much financial information, and often there isn’t much known about management ahead of time.

IPOs can be as enticing as a lottery ticket. In the year ahead, an important consideration for investing in IPOs will be understanding they may have higher risk than stocks with longer tenure.

5. Be prepared if inflation sticks around.

Inflation has been a fear all year. Inflation, as measured by the core PCE price index, (which excludes energy and food costs), crossed 3% for the first time since 1992 in April of this year. The rate of annual price increases has steadily moved higher since then. Adding to the concern of higher prices sticking around was commentary from Fed Chair Jerome Powell who said it was probably a good time to disassociate the word “transitory” with inflation at a recent Senate hearing.

The reality is no one knows how long high levels of inflation will stay. While the supply chain backlogs are real, there are signs that the pressure from these issues may be easing. For example, shipping container costs are off their peaks and backlogs are declining. Wage growth and higher housing costs could provide clues to inflation’s staying power in the year ahead.

Given the uncertainty, having some inflation hedges in your portfolio could prove prudent. Gold is the classic inflation hedge, but you could consider consumer staples stocks, financial stocks, commodities or inflation protected Treasury bonds (also known as TIPS). As far as crypto being an inflation hedge … well, the jury is still out on that one.

Best wishes on your 2022 investing resolutions!

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Headshot of Lindsey BellLindsey Bell, Ally’s chief markets & money strategist, is an award-winning investment professional with a passion for personal finance and more than 17 years of Wall Street experience. Bell’s unique ability to connect the dots between data and real life and craft bite-sized money ideas that people can use and apply stems from her deep background as an analyst, researcher and portfolio manager at organizations including J.P. Morgan and Deutsche Bank. She is known for demonstrating why and how an understanding of all things money improves a person’s finances and overall well-being. An ongoing CNBC contributor, Bell empowers consumers and investors across all walks of life and frequently shares her insights with the Wall Street Journal, Barron’s, Kiplinger’s, Forbes and Business Insider. She also serves on the board of Better Investing, a non-profit focused on investment education.

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