WHEN THE BULL BUCKS

User-friendly apps haved lured hordes of new investors to the sharemarket during the pandemic. But with 2022 looking volatile, are they prepared for what could be a wild ride?

- PETER GRIFFIN

Investors who flocked to online share-trading platforms during the pandemic face a white-knuckle ride this year as a host of global issues weigh on sharemarkets.

The early months of 2022 have not had the sheer, heart-stopping drama of March 2020. That’s when fears over the spread of Covid-19 saw the US stock markets shed value in a crash reminiscent of Black Monday in 1987 or the Great Crash of 1929. But investors have still had a bad start to the year – the worst since 2009, with some high-growth tech stocks experiencing 20-30% declines.

Fears over inflation and interest rates started the slide. Both are on the rise everywhere, which is bad news for sharemarkets. Inflation, which hit a four-decade high of 7% in the US last year and 30-year high of 5.9% here, eats into consumers’ purchasing power. The buying frenzy of the past couple of years, on everything from houses to iPhones, is coming to an end and even necessities such as groceries and fuel are causing bill shock.

For a long time, low-interest rates have deterred small-time investors from plonking their spare cash into low-risk assets like term deposits. Seeking higher yields, they have instead ploughed their money into higher-risk assets, such as shares, property and cryptocurrency, to get better returns. But now that interest rates are climbing again, it has made safer investments such as bonds and business loans more attractive, so investors are likely to rebalance their portfolios in their favour.