Wall Street: Expert Advice on Investing During a Recession

As stocks head into a bear market this year on fears that aggressive interest rate hikes by the Federal Reserve could push the economy into a looming recession, Wall Street majors are advising investors to hold on to stocks that have historically performed well during previous downturns. such as consumer and medical companies.

Peculiarities

  • Increasingly, experts are warning that a recession appears “inevitable” as the Federal Reserve tries to fight runaway inflation by raising interest rates at the fastest pace in 28 years, with a 75% increase in basis points announced earlier in the week.
  • Big Wall Street firms are now advising clients to weather the downturn by buying defensive stocks with stable margins, stable cash flow and high dividends, especially in sectors like utilities and food.
  • History shows that in past recessions, consumer and medical stocks have generally outperformed the rest of the market. In the past four recessions since 1990, they have been the only two positive sectors in the S&P 500, according to CFRA Research.
  • According to Sam Stovall, chief investment strategist at CFRA Research, the sharpest market declines tend to be in “the most economically sensitive groups” such as airlines, automakers, hotels and casinos.
  • In terms of specific sub-sectors, home goods retailers such as Home Depot performed best, while others, including footwear makers such as Nike, IT companies such as Accenture, and brewers such as Boston Beer Co, showed good results.
  • Several other big companies have posted positive earnings during the past three recessions, including McDonald’s, Walmart, General Mills, JM Smucker Co., Chesapeake Utilities, and National Beverage Corp. according to FactSet.

key quote

Analysts at Wells Fargo said in a recent report that investors should “prioritize a comprehensive, market-weighted distribution” of consumer goods and utilities stocks due to their “traditional resilience in an economic slowdown.” The company specifically expects staple food retailers such as Coca-Cola, General Mills and Kraft Heinz to benefit from “an increasingly value-conscious consumer.”

Tangent

Pundits also like energy stocks, which have performed the best on the market this year thanks to the surge in oil prices following Russia’s invasion of Ukraine in late February. With oil and gas prices rising further in recent weeks, companies like Chevron and Occidental Petroleum, favorites of billionaire investor Warren Buffett, could see their stocks continue to rise.

Monitor

“While rising interest rates should continue to drive earnings stocks, which have performed better this year, the data also supports a positive upside outlook for stocks,” said Brad Macmillan, chief investment officer at Commonwealth Financial Network. Amid the recent market downturn, some growth sectors such as technology and consumer goods have become “more attractive,” according to experts.

Article translated from Forbes US – Author: Sergey Khlebnikov

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