How I’d prepare for a potential stock market crash in 2022

I think the conditions are ripe for a stock market crash in 2022.

I do not make this statement lightly. Many investors, myself included, could end up losing a lot of money in a market downturn (at least temporarily).

However, it seems to me that uncertainty is growing around the world, and this could lead to a market sell-off. 

Stock market crash risks 

There are a couple of reasons why the market might start to become skittish in 2022. 

Last year, central banks unleashed a tidal wave of cash into the financial markets to blunt the pandemic’s impact on the global economy. This strategy worked, but some analysts have become concerned markets are now hooked on cheap money. 

As central banks start to withdraw their support, this could lead to volatility. Higher interest rates may lead to lower equity valuations, and a drop in money printing may lead some investors to reduce exposure to risky assets, like equities. 

Another challenge the market will have to overcome is rising inflation and the supply chain crisis. These factors are pushing up costs for companies, which may ultimately hurt profit margins and profitability. Lower corporate profits could lead to lower share prices. 

As well as the above, the threat of the pandemic is still rumbling on in the background. 

Considering all of the above, I am looking for ways to protect my portfolio in the event of a stock market crash occurring in 2022. 

Protection against uncertainty 

It will never be possible to protect my portfolio from a crash altogether. Still, there are a couple of assets I would buy to protect my wealth from uncertainty. 

The first is the age-old safe-haven, gold. I would invest in this asset through an ETF to protect my portfolio against market volatility and inflation. 

Alongside a gold ETF, I would acquire a basket of high-quality consumer goods stocks. Companies like Reckitt and Diageo own portfolios of well-known brands and have proven themselves over the past two years.

While past performance should never be used as a guide to future potential, I think Reckitt and Diageo’s global reach and strong brands…