Jaw-dropping inflation reports have become the norm all over the world. Strained supply chains, rising labour costs, and rocketing energy prices are forcing consumers to pay more and more for their goods and services. It looks like prices are on course to continue soaring in 2022 too.
The Consumer Prices Index (CPI) rose by 5.1% in the 12 months to November, the Office for National Statistics said today. That’s up significantly from the 4.2% growth seen a month earlier and represents a fresh 10-year high.
It seems that the Bank of England will resist hiking interest rates to combat the problem, too, as the emergence of Omicron batters the British economy, giving the inflationary boom extra stamina. The smart money remains on rates remaining at record lows of 0.1% when the rate-setting committee sits on Thursday.
Why I’m investing in my Stocks and Shares ISA
UK shares are a riskier place to park your cash than in something like a bog-standard savings account. Stock prices can go down as well as up, of course, whereas the rate of return you’ll get from something like a Cash ISA is fixed.
Still, the prospect of receiving paltry returns from a savings account means, aside from my emergency savings, I’ll continue to primarily invest in my Stocks and Shares ISA. Studies show that the average long-term investor receives an average annual return of 8%. Compare that with the sub-1% interest rates that cash savers have been receiving in recent years.
Indeed, moneysupermarket.com says the best-paying Cash ISA on the market from Paragon Bank offers a rate of just 0.65%. With inflation now at 5%, the value of any money held in one of these products is dwindling rapidly.
3 FTSE 100 shares I think could thrive
This is why I plan to continue buying UK shares for my Stocks and Shares ISA. That’s even though the inflation boom threatens the economic recovery, and rising Covid-19 infection rates and problems in China’s real estate sector pose additional risks.
There are plenty of stocks on the FTSE 100 alone that I believe could thrive in 2022. Unilever is one of these blue chips I expect to perform strongly as the immense pricing power of brands like Dove soap and Magnum ice cream should allow it to pass rising costs onto its customers efficiently. I think it’ll thrive despite the problem of rising competition among local product manufacturers.
I actually reckon B&M European Value Retail could benefit from rising inflation. Demand for its low-cost goods could well balloon as shoppers try to stretch their shopping budgets that little bit further. I’d buy it even though its lack of an online operation could see it lose out to retailers with an internet presence.
And finally, although consumer concerns over the environmental impact of fast fashion is rising, the same rush for value could also boost sales at Associated British Foods’ budget fashion division Primark. I also think this FTSE 100 share will have a solid 2022 because of its ultra-defensive food ingredients business.
