Here's Where to Look for Stocks in the Current Climate


2021’s laggards have held up in 2022, while many technology and consumer discretionary stocks have crashed. Here's where we see interesting values.

With all of turmoil currently affecting countries around the globe, things look brighter here in America than in many areas. The Omicron wave of Covid-19 appears over, as U.S. case counts have plummeted below their year-ago levels. Masking requirements and travel restrictions are being lifted, and people are returning to the workforce. February’s unemployment rate was 3.8%, down from 4.0% in January, while the participation rate rose from 62.2% to 62.3%. That sounds like a very small increment of improvement, but having both metrics—unemployment and participation—rising together paints a bright picture for the U.S. job market.

Global tensions, rising interest rates, and a strong dollar are all bad for U.S. stock prices. Every sector is negative for 2022 except for energy, which reports has gained 19% year to date.The market has exhibited a strong rotation, as last year’s laggards have generally held up better in 2022, while many technology and consumer discretionary stocks have crashed.

We are starting to see some interesting values, especially where areas of market weakness overlap. In the April 2022 issue, for example, we recommended a large-cap asset management business, a mid-cap automotive/internet play, and an online entertainment company. All three stocks are projected to outperform the broader market over the next five years.

A further market decline would probably produce some screaming opportunities. Be sure to subscribe to the #1 newsletter for 2021, the Investor Advisory Service, to receive our top stock ideas each month to help your portfolio outperform the market.

Note: Even though stock valuations remain somewhat stretched by historical standards, we remind readers that stocks are real assets which tend to keep up with inflation over time. Bonds yield less than inflation right now and look highly likely to lose some purchasing power over time.

Reprinted from the April 2022 issue of the Investor Advisory Service stock newsletter, rated #1 for performance in 2021 by Hulbert Ratings.

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