Activist company

Stick with any company that profits from inflation

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In his podcast discussing the markets today, Louis Navellier offered the following comment.

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Positive forces

We have a nice market bounce as we should today as the S&P is down 5% last week. Bespoke Investment Group has gone back and documented every other previous 5% decline in the S&P 500 since 1945. Here’s what’s likely to happen on average: Next month, the S&P is up 5.24%, over the next six months it is up 20.64%, and the following year it is up 20.16%. We should get a nice, healthy bounce.

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First Quarter 2022 Hedge Fund Letters, Talks and More

We have a lot of positive seasonal forces helping the market and should continue to help the market this week.. We’re just as the quarter-end window decoration begins and Russell’s final annual realignment is underway.

attractive dollar

The big news is that the value of the Japanese yen against the US dollar continues to fall. Since we are raising rates and they are not, the US dollar is a more attractive currency. The euro has the same problem and I expect it to be at par with the dollar sooner rather than later.

Housing starts fell 3.4%. The average price of a new home has now increased by more than $400,000, so there is an affordability issue. Moreover, mortgage rates have already doubled this year. The housing market is definitely slowing down.

Essentially what the Fed has done is they are forcing everyone out of debt. There were plenty of hedge funds that deleveraged into cryptocurrencies. There were a lot of very wealthy people, like in California, who didn’t want to pay capital gains, so they borrowed into their tech stocks. They had margin calls, so the bubble was burst. We are now in the aftermath of all this deleveraging, and the Fed knew what it was doing by raising rates.

Stick with inflation games

Meanwhile, energy prices are still very high. Energy values ​​are soaring today. They came back roaring. I still stick to my previous advice that you definitely want to stick with any business that profits from inflation. These are obviously energy stocks, fertilizer stocks, food stocks, maritime stocks and semiconductors.

Energy and fertilizers are very seasonal, but given that the war between Ukraine and Russia has been going on for so long, shortages could persist for some time. And these commodities are no longer as cyclical as before. I think commodity stocks are a very safe place to invest right now. You can worry about inflation or take advantage of it.

The other comment I have is that the P/E ratios are just ridiculously low and I like that. I have very strong sales and profit growth. So I think we’re fine. We should take advantage of the rebound because we certainly deserve it after all the gyrations of the last few weeks.

I expect the market to recover before July 4th. And then maybe a little break right after the 4th of July holidays.

Coffee beans

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