As the late, great David Bowie would belt out, “Ch, ch, ch, ch, changes.”
Changes are happening in the market and they’re bringing plenty of profit opportunities.
The biggest change is that money is rotating from the sectors that were hot last year into ones that had previously taken a backseat.
Income and dividend analyst Mike Larson, editor of Safe Money Report, expects this rotation to stick around for some time:
You’re seeing money look for a new home, and when you see these types of moves happen, it’s not something typically over in a week or two. It’s something that persists for months, or even quarters.
This shift is something investors should be aware of, and they should be adapting their portfolios.
People are placing bets on sectors that tend to do better in economic expansions.
Mike, an advocate for “Safe Money” investing, says many investors are selling the uncertainty of tech stocks and buying the relative safety of bank, industrial and energy shares that pay juicy dividends.
The shift started in late December, when money began migrating from expensive growth stocks to less expensive value stocks.
With value stocks — companies with solid fundamentals, strong price-to-earnings (P/E) ratios and dividends — investors recoup their money sooner rather than later … as opposed to growth stocks, like the tech sector, wherein investors largely pay NOW for earnings that companies might generate in the future.
- So, what’s ramping up this rotation? … Inflation!
Inflation jumped to 7% — the highest in nearly 40 years — and as Mike points out, we’re seeing it across the board in “producer prices, consumer prices and import prices.”
To combat soaring prices, the Federal Reserve has signaled it’ll soon start a series of interest rate hikes. The markets are gearing up for those hikes and that’s another reason why investor funds are finding new sectors to call home.
The upside? There are numerous ways to capitalize on industries that benefit from higher interest rates AND an inflationary environment … strategies Mike’s been recommending for months.
In this special five-minute video segment, Mike provides historical context for this move in cash flow and how to target stocks that will outperform over the long haul … while minimizing risk to your portfolio.
Mike says it’s critical to focus on income-generating strategies so you don’t LOSE money. Even when the Fed starts to raise interest rates, he says yields will remain relatively flat:
If you’re going to prosper in an inflationary environment, you need to derive higher income from your portfolio.
You can’t just sit there in treasury bonds that yield 1.5, 1.8 %, because when inflation is running at 7%, you’re losing money.
Every penny you put into a treasury bond right now, if at the end of the year, inflation doesn’t change, you’ve lost money — a few percentage points for every dollar.
The energy and financial sectors aren’t going to go up 5% every week like they did at the start of the year. But you’re probably going to see steady gains throughout the year as money rotates out of those … high growth names into more economically sensitive names.
In this insightful video, Mike discusses:
- A stock that’s “breaking out” after months of increased earnings.
- A rising exchange-traded fund (ETF) in the oil and gas industry.
- Two stocks in the financial sector primed for this environment.
- How high interest rates will rise and the effect on your investments.
- A strategy to earn an extra $1,000 every week, whether the market is up, down or sideways.
- A go-to tool every investor should utilize.
- And more!
The information in this short segment couldn’t be timelier. I suggest you click here to watch it now.
Happy investing!
Jessica Borg
Financial News Anchor
Weiss Ratings
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