VIDEO: Sectors With Inelastic Demand
It’s been a time of intense price swings. We’re seeing indices yo-yoing in 5%+ moves, and it’s easy to get market whiplash.
The wild shifts are due, in part, to the debate over the Federal Reserve’s next few steps.
Research Analyst Sam Blumenfeld says investors should be ready for more fluctuations in the coming weeks:
Much of the price action of the market right now is dominated by the Fed and sentiment surrounding whether it’s going to continue its aggressive rate hike cycle.
You have the market changing perspective when new data comes out.
The recent Consumer Price Index and Producer Price Index misses prompted traders to price in a nearly 100% chance of another 75-basis-point rate hike at the Fed’s meeting this Wednesday, Nov. 2.
And then you have other developments where the market becomes more optimistic, like after the United Nations called for the halt of rate hikes from advanced economies.
The U.S. central bank raised its target rate by 75 basis points to 3%–3.25% in September, and it’s expected to continue hiking until it reaches 5%–5.25% by next March.
The Fed says lowering inflation from 8.2% is its top priority, so changing the pace and size of rate increases in December and onward — making the much talked about and desired pivot — seems unlikely if inflation stays elevated.
However, anything is possible and there’s no need for despair.
Even in this topsy-turvy environment, their model portfolios have generated substantial gains.
Members are sitting on open gains of more than 279%, 36% and 22%.
In today’s four-minute video segment, Sam discusses the areas of the market that can help insulate you no matter which way the broad market pendulum swings.
He says that amid volatility, sectors with “inelasticity of demand” are ones to target:
If you have the Fed continue hiking rates, they will likely drive the U.S. economy into a recession.
And in the event of a recession, it helps to position yourself in sectors that have relatively inelastic demand.
These are companies that produce goods that won’t see their demand falter when economic conditions worsen or become more uncertain.
When consumers are left price-sensitive for goods, demand will stay resilient, and consumers will still buy those goods.
Sam and I also explore:
• Two exchange-traded funds in elastic sectors that are outperforming the S&P 500 index.
• How the U.S. mid-term elections may positively impact your returns.
• Keeping your eyes on the prize as a long-term investor.
The information in this short segment couldn’t be timelier. Just go to the video box above to watch it now.
Financial News Anchor
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