Sponsored Content – Though 2022 has been a difficult year for investors, we have indeed seen some early signs that your portfolio’s outperformance will become increasingly dependent in the months (and years?) ahead on proper sector and stock selection; not on “passive” investing, says Chris Temple, editor and publisher, National Investor Publishing,
Back during this fall’s The Money Show Orlando I had the privilege of speaking to a standing-room-only crowd on the theme of finding “story stocks.”
The first phase of the new bear market we are in has been odd in several respects, as I continue to explain to our Members. Consider, first, the way in which “The Old FAANGs” and other high-profile equities have been massacred:
1. Meta (Facebook): -66%
2. PayPal: -65%
3. Tesla: -63%
4. Advanced Micro Devices: -57%
5. Netflix: -52%
6. Amazon: -50%
7. Nvidia: -46%
8. Disney: -45%
9. Google: -39%
10. Apple: -27%
That the major indices have done less bad (using round numbers, the S&P 500 is down 20% and the Nasdaq 30%; all these figures are through the week ended December 16) is small consolation. Almost everywhere you look—save for isolated story stocks and counter-performing sectors such as energy and some battery metal/green themes)—the damage has been substantial.
One good aspect of the above is it indicates that—though the Federal Reserve and other central banks are incrementally removing some of this—a LOT of liquidity remains in the markets. That is unlikely to change, unless the Fed does end up breaking something in global markets and we have a more acute deflationary/credit event. But barring that, we can already see the landscape before us—quite different from anything investors have experienced in at least a generation, if ever—that will compel investors to act like investors again.
I have explained for over a year now the two main themes going forward that we will have to react to in our sector/stock selections and broader investment game planning:
- “The Great Stagflation” – Contrary to the Fed’s forecasts/wishful thinking, the days of 2% or less headline inflation are behind us. All the money printing of, especially, the 2020-2021 period is coming home to roost. Further, global supply chains remain challenged in some ways…labor, energy, and other costs have risen and more. In short, we need to prepare for a world where we have a “bottom” inflation rate of more like 4-5%.
That, in turn, will keep most if not all the increase in interest rates of recent months intact. That will be a double whammy on both personal and business households, balance sheets and the like…that’s where the “stag” part will come in as the economy bogs down over rising costs of all kinds.
- “The New FAANGs” and a Reversal of Globalization – This is another subject I have been harping on (three different such presentations to The Money Show this past year!) A mix of factors—shortages, underdevelopment, resource nationalism, the buildout (or attempt at) “green energy” infrastructures and more—are coalescing into a multi-year bull market for some commodities. As indicated earlier, energy has already been benefitting from this. Other areas will join in more notably in 2023.
Beyond these two “macro” forces, remember that invention, innovation, and more are HAPPILY a part of our world no matter what the broad markets are doing. In my recent comprehensive report of this same title (DOWNLOAD FOR FREE HERE) I give myriad examples, past and present (including several of my current story stock recommendations), of how YOU can uncover the stories of tomorrow…make sure to check it out!
If you are not already a Member, visit Chris Temple at NationalInvestor.com.