How to Invest in the Stock Market in 2023

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2021 has been quite a year! We are mired in year two of a global pandemic, and yet the global markets have been consistently hitting new all-time highs. As of 12/28/21, the S&P 500 index was sitting near an all-time high record close of 4,786. The major indices have been on an unparalleled bull run since COVID-19 first impacted the world back in March of 2020.  

But despite indices hitting all-time highs, we have also seen volatility in the markets. In particular, we have seen a drastic pullback in certain pandemic stocks that went soaring in the beginning of 2021. Adding to the uncertainty are macroeconomic factors and monetary policies that are coming into play.

So this naturally leads to the question: how do you invest in the stock market for 2022? In this article, we will discuss market insights and interesting pockets of the stock market such as pandemic stocks, value stocks, and new technology stocks.

Stock Market Considerations

As mentioned earlier, the stock market has had a phenomenal year for 2021. The S&P 500 has yielded approximately 27% year-to-date returns as of 12/28/21. This is nearly triple the average annual rate of return for the benchmark index of about 10% per year.  Despite being more volatile, the NASDAQ index has still returned 22% year-to-date (as of 12/28/21). The blue chip Dow Jones has also seen a great return of 19% year-to-date (as of 12/28/21), which shows it hasn’t just been high-flying tech stocks that have been carrying the load. With all three major indices providing such high returns this year, does the stock market still have room to go up in 2022?

Many Wall Street firms believe so. Goldman Sachs, JP Morgan, Credit Suisse, and Oppenheimer believe that the S&P 500 will breach the 5,000 level for the first time in history. Other firms like Bank of America and Morgan Stanley forecast that the S&P 500 will pull back lower in 2022. Ultimately, no one has a crystal ball on how the market will actually perform, but investors at minimum should exercise caution in the market as we have not seen much of a pullback yet. Here are two additional issues to to consider when investing in the stock market for 2022: 

  1. The US Federal Reserve has announced that it will be tapering its stimulus policies that have helped to support the US economy during the pandemic. This brings the question of whether the economy can thrive without government stimulus. Additionally, the Fed also signaled that there may be interest rate hikes in 2022, which could also put pressure on stock market valuations. 
  2. A wildcard could be the ongoing presence of COVID-19. Just when we thought the worst had passed, the new Omicron variant began to rapidly spread across the world. The market went down for a couple of days, but then continued on its path to new all-time highs. With vaccinations now widely available, the threat of Omicron could be contained much quicker, but it’s still difficult to tell whether the pandemic as a whole will be coming to an end any time soon. 

Given the two factors above, it may seem risky to go into the markets. But investors are in a dilemma. The US economy has been hit with rising inflation and a devaluation of the American dollar. Grocery prices, housing, and other everyday staples have all been rising in price. If this becomes a persisting issue, then holding cash at near-zero interest rates will effectively yield negative returns. 

We’ll discuss in the next sections interesting pockets in the stock market. If you’re just getting into the stock markets and still trying to decide which stock broker to use, you can check out this comparison of E*Trade and Robinhood

Pandemic and Stay at Home Stocks

One industry that thrived in the first part of the pandemic was stay at home stocks. With work becoming increasingly remote, and many of us finding virtual ways to communicate, it is no surprise that companies like Zoom Video Communications (NASDAQ:ZM), DocuSign (NASDAQ:DOCU), and Peloton (NASDAQ:PTON) were crowned the winners of the pandemic. But fast forward to 2021 and these three stocks are down 46%, 31%, and 77%, respectively, year-to-date (as of 12/28/21). Whenever stocks slide so far down, it’s always interesting to take a second look as valuations are now more attractive.  

That said, just because a growth stock has been beaten down doesn’t mean it can return or surpass its previous highs again. Remember to exercise due diligence and research the stocks you invest in. Some questions to ask yourself are: 

  • Does this company have long term viability? 
  • Can this company successfully capture market share? 
  • Is the growth model sustainable? 
  • What is the road to profitability? 

These are not an exhaustive list of questions, but can get you started in your due diligence process when considering whether to invest in these stocks. 

Value Stocks

Even though markets are at all time highs, there are still value opportunities lying around.  With the potential for a rise in market volatility heading into 2022, it could be a time to look at some defensive stocks that could provide some margin of safety. Stocks trading at more reasonable valuations such as Sprouts Farmer Market (NASDAQ:SFM) and Chegg Inc (NYSE:CHGG) don’t receive as much attention as some popular growth names, but could be considered reasonable investments at their current valuations (as of 12/28/21). Additionally, there is also a way to “supercharge” value stocks with LEAP options, though this is riskier than simply buying the stock.

Again, it should be noted that even if stocks look like they are trading at a value, it does not mean that they are guaranteed to be winners. There are plenty of value stocks that continue to fall, which are known as “value traps”. Always conduct your due diligence and make sure you know what you are getting into with any stock you buy. You can learn more about dividend and income stocks with HALO Technologies.

According to The Assay, platinum and palladium mining stock is another hot pick for 2022. This is thanks to the EV boom, consequently driving up both the demand and price of platinum and palladium.

Stocks Related to New Technology 

The next decade will be an interesting one for both tech lovers and tech investors. We could be  standing on the precipice of a new evolution of the internet as we know it. The Metaverse, as it is now called, is said to be the next iteration of the internet. Many speculate that it will be an internet where users can access and experience a virtual world. Much of the development of this space is being headed by tech giants like Facebook (NASDAQ:FB) and NVIDIA (NASDAQ:NVDA). In fact, Facebook and its CEO Mark Zuckerberg are so deeply involved, he has officially changed the name of the company to Meta Platforms. 

With the Metaverse comes integration of digital currencies like cryptocurrencies, as well as the implementation of the much talked about Web3.0. What is Web3.0? It is a new iteration of the internet that relies on blockchain technology to create a more decentralized environment. Crypto brokers like Coinbase (COIN) may benefit from an increased usage of blockchain in this newest version of the web. Web3.0 has many supporters; the CFO of Lyft left the company to work for the NFT marketplace Opensea (ebay of NFTs). But it also has its doubters including Tesla CEO Elon Musk and Block CEO Jack Dorsey.  

It’s tough to say what the future holds for these technologies with high disruptive potential, but it makes sense to take a look at the stocks involved with these technologies.  


The bull run from 2020 continued into 2021, and while some stocks took a breather, others continued to reach new heights despite the ongoing pandemic. With inflation raging throughout various sectors, holding on to too much excessive cash could be a costly move. 

But investing in the stock market in 2022 is going to bring its own set of challenges. First, the US Federal Reserve is implementing its tapering policies and will soon be reducing the number of assets it purchases. Will the economy and stock market continue to thrive without stimulus? Second, the Fed also communicated potential interest rate hikes in 2022, which could have an impact on stock market valuations. Finally, COVID-19 remains a very real part of our lives, and may continue to affect certain industries as well as global supply chains and production levels.

Despite these factors, there are still interesting pockets of the stock market to look at. Many pandemic and stay at home stocks have been beaten down in 2021 despite the overall market rallying. Investing in value stocks could also be a good defensive move considering markets are at all time highs. Finally, new technologies such as the Metaverse and Web3.0 could change the way the internet works, and stocks in this space could provide attractive returns if the technology gains widespread adoption. 

Part of the investing process is about taking all the relevant information and coming up with actionable moves. Taking a look at these pockets in the stock market while taking into account the macro environment could help brainstorm ideas that will benefit your investment portfolio. Happy investing in 2022! 

Disclaimer: The analysis presented is the author’s opinion and does not constitute investment advice. The author may have investments in one or more of the mentioned stocks. 

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The content of this website is for informational purposes only and does not represent investment advice, or an offer or solicitation to buy or sell any security, investment, or product. Investors are encouraged to do their own due diligence, and, if necessary, consult professional advising before making any investment decisions. Investing involves a high degree of risk, and financial losses may occur.

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Jay has over a decade of finance experience spanning asset management, restructuring, and investment banking. He started Money Knock to help readers navigate through the intricacies of various personal finance and investment topics. He is a CFA Charterholder.

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