During the week of January 17th through January 21st, stocks posted their worst week in two years. US markets are currently steeped in fear as investors and large money managers are repositioning their portfolios away from volatile investments in favor of far more conservative positions that are likely to do well given current market conditions.
There are several major factors leading to the current state of fear in equity markets. Inflation concerns, the threat of rising interest rates by the Federal Reserve board, and even more importantly, the Ukrainian crisis are all weighing on equity markets. The bond market is almost equally as volatile as bonds do not respond well to a rising interest rate environment.
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The three major US stock market indexes have fallen for three weeks in a row, continuing the slide that began in early 2022. The NASDAQ has fallen for four weeks in a row and the Dow Jones Industrial Average finished its worst weekly performance in two years. The possibility of higher interest rates particularly hit technology stocks and shares of companies with little or no earnings pushing the NASDAQ into lower territory.
The Ukrainian crisis could potentially disrupt the supply of oil and natural gas if the US retaliates with tariffs against Russia, should they choose to invade Ukraine. As I am writing this article it has been announced by the administration that there will be a mobilization of US troops in countries surrounding Ukraine including Poland.
We believe these conditions present opportunities for investors to reposition their assets into far more conservative sectors that can withstand the effects of higher interest rates and inflation. There are several sectors and industries that should continue to do well despite market fluctuations.
Transportation stocks such as long haul trucking companies, railroads, transocean shipping companies as well as air freight companies appear very attractive as this is the solution to helping solve the supply chain crisis.
All forms of utility stocks historically have done well during past market downturns. We all have to heat and cool our homes and businesses. Utility stocks can be very perse in nature and include electric, natural gas, water, and companies that pick up your trash as well as owning landfills.
Consumer defensive stocks also look very attractive. This is a broad category of investments that includes companies that manufacture things that consumers use every day and feel that they cannot live without. There are many great examples of such companies and they’re very perse in nature. They include manufacturers of food, dairy, beverages, cleaning supplies, paper goods, and personal care items such as cosmetics.
Companies that pay high dividends also tend to do very well during such volatile market conditions. Many investors purchase these types of stocks for retirement income and are highly unlikely to sell them as they may have to pay large amounts of capital gains taxes if they loaned them for a long time.
Please feel free to reach out to our office to arrange a no-obligation no cost consultation as to how you might reduce risk in your portfolio and take advantage of current market conditions. Call 1-800- 303-9255 extension 1 to arrange a time for an in-person or virtual meeting.
This story originally ran in the February issue of The Prairie Land Buzz Magazine. The Buzz Magazine is distributed free each month to over 400 locations, in 60 cities, in 11 Illinois counties. For more information visit http://www.thebuzzmonthly.com.
