Investment Strategy
Global financial markets have come under heavy selling pressure as U.S. inflation hit a 40-year high, and the interest rates are increased. Other assets have fallen, including stocks, cryptocurrencies, emerging currencies, commodities, and even gold is dropping, although with appreciation of dollars.
Due to current wave of selling pressure, the risk is high and weakened consumer demand. The drop of consumer confidence is the key risk for the economy and the market and now it is beginning to reflect excess inventory risk. Athough the S&P 500 index has fallen sharply, the profit forecast of US companies is still too high and may be further revised down.
So which stocks to watch or pay attention in this environment or how to make change to your current portfolio in H22 2022, below are some insights:
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US stocks in downward pressure
- The investors should look for value opportunities focusing on high dividend stocks and stocks with a margin of safety should consider both price and earnings forecast downside risks.
- Buy low and sell high: In a falling stock market environment, there are still good investment opportunities : energy and healthcare stocks are attractive areas, especially during recessions.
- Instead of selling stocks during a recession, should adjust the stock mix and look for companies that have performed well during recessions in the past, including consumer staples stocks.
- Holding stocks that can weather the recession, such as banks, food and Pharmaceutical companies.
● Diversification targets other than U.S. stocks
- Chinese assets are a good target for diversification, due to China starting to loosen epidemic prevention and control restrictions, and also the technology industry.
- As stocks and bonds tumbled, fundamental-focused investment strategies have boosted the appeal of investments that offer reliable returns, such as stocks that pay steady dividends.
● Investment bond
- High-grade bonds can strike a good balance between generating income and fending off worries about a slowdown.
- While the short-term challenge for fixed income comes from lifetime risks, the revenue from government and corporate bonds provides a better buffer against price volatility caused by rising interest rates.
● Dividend yield
- To increase the holdings of Chinese stocks, including renewable energy infrastructure and aquaculture, citing attractive shares and dividends.
- To look for investment in Asian companies with dividend yields of better percentage, to look at the bond yield and protection during times of heightened market volatility.
● Free cash flow stocks
- To evaluate companies and its cash flow background, should hold the stocks in companies that generate free cash flow for better flexibility.
- Suggested to look for healthcare and insurance stocks in the S&P 500, and also some technology and software stocks with a lot of free cash flow.
● Pricing power
- To research more to see which company stocks that tended to perform well even in a weak general economic environment.
- The stocks of these companies is better as the business has pricing power, or operates in a special niche, or is a key player in a highly concentrated market.
- As Asian economies are reopening, the outlook for domestic demand in Asia is improving and then the valuations are good once market sentiment improves.
Due to current wave of selling pressure, the risk is high and weakened consumer demand. The drop of consumer confidence is the key risk for the economy and the market and now it is beginning to reflect excess inventory risk. Athough the S&P 500 index has fallen sharply, the profit forecast of US companies is still too high and may be further revised down.
So which stocks to watch or pay attention in this environment or how to make change to your current portfolio in H22 2022, below are some insights:
- The investors should look for value opportunities focusing on high dividend stocks and stocks with a margin of safety should consider both price and earnings forecast downside risks.
- Buy low and sell high: In a falling stock market environment, there are still good investment opportunities : energy and healthcare stocks are attractive areas, especially during recessions.
- Instead of selling stocks during a recession, should adjust the stock mix and look for companies that have performed well during recessions in the past, including consumer staples stocks.
- Holding stocks that can weather the recession, such as banks, food and Pharmaceutical companies.
● Diversification targets other than U.S. stocks
- Chinese assets are a good target for diversification, due to China starting to loosen epidemic prevention and control restrictions, and also the technology industry.
- As stocks and bonds tumbled, fundamental-focused investment strategies have boosted the appeal of investments that offer reliable returns, such as stocks that pay steady dividends.
● Investment bond
- High-grade bonds can strike a good balance between generating income and fending off worries about a slowdown.
- While the short-term challenge for fixed income comes from lifetime risks, the revenue from government and corporate bonds provides a better buffer against price volatility caused by rising interest rates.
● Dividend yield
- To increase the holdings of Chinese stocks, including renewable energy infrastructure and aquaculture, citing attractive shares and dividends.
- To look for investment in Asian companies with dividend yields of better percentage, to look at the bond yield and protection during times of heightened market volatility.
● Free cash flow stocks
- To evaluate companies and its cash flow background, should hold the stocks in companies that generate free cash flow for better flexibility.
- Suggested to look for healthcare and insurance stocks in the S&P 500, and also some technology and software stocks with a lot of free cash flow.
● Pricing power
- To research more to see which company stocks that tended to perform well even in a weak general economic environment.
- The stocks of these companies is better as the business has pricing power, or operates in a special niche, or is a key player in a highly concentrated market.
- As Asian economies are reopening, the outlook for domestic demand in Asia is improving and then the valuations are good once market sentiment improves.
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NANA123 :
whqqq : I agree with you. Banks and Chinese technology stocks are good choices because they are less affected by the economic recession.