Financial Market Post Holiday Sales

This year’s post-holiday shopping is rife with high-quality bargains. The current correction is a stock-pickers’ dream for gems from classic large caps to modern tech, and it’s time to get in the driver’s seat. Of course, we will steer clear of bonds. Only low-quality bonds provide income to compensate for falling bond prices in this medium term rate rising environment, and default risks are rising.

Nonetheless, we are rounding the bend on growth. The infection rates from the Omicron variant are peaking and most reputable sources expect the numbers to fall as quickly as they rose. Furthermore, the winter months will soon be behind us. Disenchanted job-seekers are coming back: that is why the jobless numbers were higher than expected. We believe growth will jump and the relaxation of the supply-chain bottlenecks will be enough to stem a spike in inflation (and the relevant market jitters).

Geopolitics are nothing to ignore at the moment. The stand-off between Russia and the US over the Russian troop buildup on the Ukrainian border could escalate.  But Russia – a power to be reckoned with for its military strength but a clear featherweight in GDP on the global scale – clearly has more to lose than gain. We believe the real question is how Putin will find a face-saving way to de-escalate.

We have been divesting from indices to re-invest this week or next in single stocks of bottoming, overly-battered growth stocks (mostly tech) which have positive cash flows, income, and valuations which have come back down to earth.  Even some are a buy, although vulnerable to rising interest rates, because they are riding exploding trends in cloud computing, digital security, energy technology, and electric components. Microchips, semi-conductors and Biotech are highly attractive now.

Some of our picks: Generac (GNRC), Freeport-McMorRan (FCX), and Consolidated Edison (ED). In Europe: RWE and ENEL and in Switzerland: Kuehne und Nagel (KNE), Arbonia (ARB), Basilea (BSL)

Finally, we are only more encouraged by the rising volume of bearish “market talk”. Sure, it will continue to be bumpy. So fasten your seatbelts; but expect a sweet ride.

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