Analysts reveal their best stock picks to beat stagflation and outperform unstable markets

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Analysts reveal their best stock picks to beat stagflation and outperform unstable markets

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Top line

Stocks had one of the worst starts to the year in history amid the looming threat of stagflation – consistently high inflation coupled with stagnant economic growth, but analysts say it’s time to buy high-yielding, strong dividend-yielding companies cash flows that will outperform the rest of the market.

Main aspects

With rising inflation and geopolitical uncertainty due to the Russian invasion of Ukraine already dragging markets lower this year, most experts are now warning that the economy is about to be plagued by stagflation and that the risks of recession are increasing.

Goldman Sachs chief strategist Christian Mueller-Glissmann says stagflation – a situation where inflation is high, economic growth slows and unemployment remains high – is already here.

With stagflation looming, “cash flow and balance sheets are coming into focus,” according to analysts at Jefferies, who point out that high dividend stocks that are “ATMs” typically outperform the market during times of high inflation. and slowdown in economic growth.

The company recommends health care choices like Pfizer and Medtronic, as well as several consumer companies including Procter & Gamble, Best Buy, Hasbro, and Home Depot.

Goldman Sachs, meanwhile, recommends stocks that have been beaten in recent months and now look cheap, including vaccine maker Moderna, investment manager Blackstone, and semiconductor firm Micron Technology.

JPMorgan also says it’s time to buy – the company especially loves energy-related stocks such as Exxon Mobil and Sunrun, while also expecting a rebound in some consumer and retail stocks, namely Uber, McDonald’s, Nike, Target and Estee Lauder.

Surprising fact:

With the S&P 500 down about 8% in 2022, markets had one of the worst starts of a year since WWII, according to a recent note from JPMorgan. The only other times in recent history that the benchmark index worsened in the first few months of the year was during the 2008-2009 global financial crisis and the 2020 Covid pandemic.

Crucial quote:

“Recent market volatility has created buying opportunities,” Goldman analysts said in a recent statement.

Key background:

With inflation at a 40-year high, up 7.9% from a year ago, the Federal Reserve raised interest rates on Wednesday for the first time since 2018, by a quarter of a percentage point. Fed officials warned about the “highly uncertain” economic impact of the Russian invasion of Ukraine, saying earlier this week that higher energy prices as a result of the conflict are likely to “create additional pressure. upwards on inflation and will weigh on economic activity “. The central bank now expects six more rate hikes this year and three more in 2023 (compared to a previous forecast of three rate hikes each year).

Further reading:

The much anticipated Federal Reserve rate hike is here: Powell announces a 0.25% hike (Forbes)

Stocks rise after the Fed hikes rates, plans for six more hikes this year (Forbes)

Most Wall Street pundits now predict stagflation – here’s what it means for investors and the US economy (Forbes)

These energy stocks are on the rise as oil and gas prices continue to rise with no relief in sight (Forbes)

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