Stick With Any Company That Is Profiting From Inflation

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In his podcast addressing the markets today, Louis Navellier offered the following commentary.

If you wish to listen to this commentary, please click here. 

Positive Forces

We are having a nice rebound in the market as we should today because the S&P declined 5% last week. Bespoke Investment Group went back and documented all the other previous 5% declines in the S&P 500 since 1945. Here’s what will likely happen on average: in the next month, the S&P is up 5.24%, in the next six months, it’s up 20.64%, and the next year, it’s up 20.16%. We should get a nice and healthy rebound.

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Q1 2022 hedge fund letters, conferences and more

We have a lot of positive seasonal forces that are helping the market and should continue to help the market this week. We are at the time when quarter-end window dressing starts and the final annual Russell realignment is going on now.

Attractive Dollar

The big news out there is the Japanese Yen's value against the U.S. dollar continues to plummet. Since we are raising rates and they are not, the U.S. dollar is a more attractive currency. The Euro has the same problem and I expect that it will be in parity with the dollar sooner than later.

Housing starts fell 3.4%. The average price of a new home is now up over $400,000 so there's an affordability issue going on there. Additionally, mortgage rates have already doubled this year. The housing market is definitely slowing down.

Essentially what the Fed has done is it is forcing everybody to de-leverage. There were a lot of hedge funds that deleveraged in cryptocurrencies. There were a lot of very wealthy people, like in California, that didn't want to pay capital gains, so they would borrow in their tech stocks. They got margin calls, so that bubble has been pricked. We are now in the backwash of all this de-leveraging, and the Fed knew what they were doing as they were raising rates. 

Stick With Inflation Plays

In the meantime, energy prices still remain very high. The energy stocks are soaring today. They came roaring back. I still stick by my previous guidance that you definitely want to stick with any company that is profiting from inflation. That is obviously energy stocks, fertilizer stocks, food stocks, shipping stocks, and semiconductors.

Energy and fertilizer are very seasonal but because of the war between Ukraine and Russia has been going on for so long, the shortages might continue to persist for some time. And these commodities are not as cyclical as they used to be. I think commodity stocks are a very safe place to invest right now. You can worry about inflation or you can profit from it.

The other comment I have is the P/E ratios are just ridiculously low and I like it. I've got very strong sales and earnings growth. So I think we're okay. We should enjoy the rebound because we certainly deserve it after all the gyrations in recent weeks.

I expect the market to rally going into the 4th of July. And then maybe a little pause right after the 4th of July holiday.

Coffee Beans

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