The wild week we've had and what is to come.
Hello friends, no, it's not Jim Nantz, but all I can say is what a crazy last couple of weeks we've had. With monetary policy under the microscope, all I can say is things will get worse before they get better. As of Sunday at 10pm, Dow, S&P, and Nasdaq futures are trading lower at -1.5%, -1.8%, and 2.3%, respectively. With inflation now surpassing 10% and the Fed finally raising rates a 50 basis points, the bull market seems to be over. We've seen this hardest in the technology industry. For a while, cheap cash had bolstered these stocks, and the cash-burning practices were overlooked; now, stable and growing cash flows will be what is hot. For many (including myself), a non-zero rate environment is an uncharted territory, and thus the traditional knowledge we've acquired over the last 20+ years will go to the wayside. I'm not here to be the doomsday fanatic at the corner of Government and Bay Avenue, yelling the end is near, but caution now must be taken in this market. I expect to best weather the storm; stocks considered secular, and consumer staples will give portfolios growth. XLP, the Spider Consumer Staple ETF, is definitely on my radar. These companies have long-established businesses, which produce free cash flows and fairly normal growth. One company I'd look at is Hershey HSY and Walmart WMT; both have very low betas (thus low volatility). Hershey is interesting that not only is the chocolate industry considered recession-proof, but sales actually increase. Walmart is another great one, as with wages growing slower than inflation (by a near 1 to 2 margin), more shoppers will flock to find ways to cut expenses at the register.
I leave with this quote from the Book of Proverbs, "Whoever is slow to anger has great understanding, but he who has a hasty temper exalts folly." This is true in all aspects of life, and especially in investing. Falling markets may make us anxious and want to panic and sell; however, seeing through this, and being patient, will lead to long-term growth and rewards.