Why this could be the best year for stock market investors in a decade

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So many financial headlines go overboard at times like these, don’t they? I’ve just seen one talking about the “worst year for stock market investors in a decade.”

I see no chance of 2022 being anything like the worst year for us. Not even a bad year, in fact. If anything, I’m wondering whether it might turn out to be the best year we’ve had in a while.

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Most investors are still buying shares. And many still have decades ahead of them. So, if the things they are buying, and hope to buy lots more of in the coming years, are getting cheaper… that’s a good thing, right?

Rising costs are good?

Now that energy prices are soaring, does that make it a great year for people who want to keep warm? Of course not. And rising food prices are definitely not good for people who are attached to the idea of keeping their bellies full.

If we want to buy food, and prices rise, that’s bad. But if we want to buy shares, and prices fall, that’s bad? It does seem to be what the financial pundits think.

No doubt these same headline writers would say 2020 was a terrible year for stock market investors. It was, after all, when Covid-19 hit and sent share prices plummeting. But I bought some high-quality shares that year at extra-cheap prices.

Bargain buys

Lloyds Banking Group shares are down 8% over the past 12 months, at 43p. But investors who bought at 25p in 2020 are now up 72%. BAE Systems shares could be had for under 400p in 2020. But they’ve gained 41% in the past year and cost 760p today.

WPP is down 16% in 12 months, and has fallen 26% so far in 2022, to 823p. It’s a company that could suffer during an economic downturn, as marketing spend is reined in. But investors who bought for less than 500p in 2020 are in the money.

The sharp decline clearly made 2020 a great year for investors who bought those three, and many other shares.

Stock market trends

Bull markets tend to last around five years on average, while the average bear market seems to last around a year. I’ve been through a few bear markets in my time. But when I check a long-term stock market chart, they’re hard to see now.

Instead, there’s a general upwards trend, with the occasional wobble. And the wobbles look ever smaller the further back I check. But those wobbles were always great times to buy shares.

Best year?

So will 2022 turn out to be the best year for stock market investors in a decade? The NASDAQ and S&P 500 are both officially into bear market territory, having dipped more than 20%. So for people who buy stocks in those indexes, I think maybe it already is.

Here in the UK, with the FTSE 100 hardly moved, I reckon the chances are less so. But any weakness in the second half of the year might just make it the second best year after 2020. Fingers crossed.