Wall Street: expert advice on investing in a recession

As stocks fall into a bearish market this year for fears that an aggressive Federal Reserve rate hike could push the economy into a looming recession, big Wall Street firms are advising investors to hold stocks that have historically performed well during previous recessions. , for example, consumer. and medical companies.

Highlights

  • Experts are increasingly warning that a recession seems “imminent” as the Federal Reserve tries to fight uncontrolled inflation by raising interest rates at the fastest pace in 28 years, with a 75% increase in base points earlier this week.
  • Large Wall Street firms are now advising customers to overcome the downturn by buying stocks with stable margins, stable cash flow and strong dividends, especially in sectors such as utilities and food.
  • History shows that in past recessions, consumer and medical stocks tended to outperform when the rest of the market was in trouble. According to a study by CFRA Research, in the last four recessions since 1990, they have been the only two positive sectors in the S&P 500.
  • The biggest market declines tend to be in the “most economically sensitive groups”, such as airlines, automakers, hotels and casinos, says Sam Stovall, chief investment strategist at CFRA Research.
  • In terms of industry-specific sub-sectors, retailers such as Home Depot performed best, while others performed well, including shoe manufacturers such as Nike, IT companies such as Accenture, and brewers such as Boston Beer Co.
  • Several other large companies have reported positive results over the past three recessions, including McDonald’s, Walmart, General Mills, JM Smucker Co., Chesapeake Utilities and National Beverage Corp. according to FactSet.

key quote

In a recent report, Wells Fargo analysts noted that investors should “lean towards a comprehensive, market-balanced distribution” of consumer commodities and utilities due to their “traditional resilience in a slowing economy.” The company especially expects retailers of basic foods such as Coca-Cola, General Mills and Kraft Heinz to benefit from “increasingly valued consumers.”

Tangent

Experts also like energy stocks, which have been the most efficient sectors of the market this year due to rising oil prices since Russia’s invasion of Ukraine in late February. With oil and gas prices rising in recent weeks, companies such as Chevron and Occidental Petroleum, both favorites of billionaire investor Warren Buffett, have been able to watch their shares continue to rise.

Control

“While rising interest rates should continue to boost stock returns, which turned out to be higher this year, the data also confirms a positive outlook for stock growth,” said Brad Macmillan, director of investment at the Commonwealth Financial Network. According to experts, against the background of the recent market downturn, some growth sectors, such as technology and consumer discretion, have become “more attractive”.

Article translated from Forbes US – Author: Sergei Khlebnikov

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