Inflation is rising and global growth slowing. CNBC Pro reviews recent research documents to determine the best stocks for strategists in such a difficult market. For the first time since 2003, the U.S. Federal Reserve increased rates by 50basis points in March. This is the beginning of what many anticipate to be an aggressive rate-hike cycle in this year. The Fed intervention failed to stop inflation from rising again in April. It is continuing the climb that has put consumers at the brink of bankruptcy and threatened economic expansion. UBS claims that inflation has reached its peak in the U.S., however it warns that stagflationary forces will continue for a long time. The Swiss investment bank measures stagflation — defined as rising inflation along with slowing growth — when its Stagflation Pressure Index registers a reading above 2.5 for a 12-month period. UBS believes U.S. markets have not priced in stagflation, with S & P 500 indicators factoring in just a 5% probability of stagflation, UBS’ strategists, led by Bhanu Baweja, said on May. 18. The “Stagflation Protection list” of the bank includes the “most preferred” stocks. These are the ones that have the lowest sensitivity and highest margins during adverse economic conditions. A slew of consumer stocks made the bank’s list, including Target , Walmart , Costco , Kroger , eBay and Procter & Gamble . Other stocks that made the list include Exxon Mobil and Chevron in the energy sector, Abbott Laboratories , Johnson & Johnson and Pfizer in health care as well as Microsoft in the technology sector. ‘Extremely cheap’ stocks Bernstein, meanwhile, believes it is important for investors to stick with “value” — despite waning earnings support for the stocks. Markets are not likely to appreciate value stocks. They have low price-to book and price-to earnings ratios and high dividend yields. Bernstein’s strategist Sarah McCarthy said that while there are macro risks to value exposure, it was important to have some equity in the stock. 17. After the April higher-than-expected U.S. consumer price increases, she noted that both value stocks and European ones had performed better than expected. She stated that value stocks were still very cheap in comparison to the past and that the spread of valuations within the markets, both in Europe as the US, still has plenty to shrink further. Read more The Fed doesn’t care about your stock portfolio — at least until inflation calms down Citi downgrades several apparel stocks, including Gap, because of inflation hitting consumers Morgan Stanley sees stocks lower from here one year out, recommends staying defensive The bank favors value stocks with defensive attributes — stocks in defensive sectors that are thought to be recession-proof — amid an outlook of uncertain inflation and slowing growth. Bernstein searched for European stocks that had at least 4% dividend yields. The stocks have also had a record of increasing or maintaining their dividends over at least seven consecutive years. This screen revealed BP, Deutsche Post, German chemical firm BASF, as well as utilities ENEL and EDP. The bank has rated all of them as overweight. Bernstein advises that “quality stocks” will do well in times of economic slowdown and to hedge against volatility. A search by the bank for quality stocks led to luxury goods companies LVMH and Kering, Dutch information service firm Wolters Kluwer ; Swedish conglomerate Assa Abloy ; mining company Antofagasta ; and Terna, the Italian grid operator Terna.
According to the U.K. Office for National Statistics, its estimations suggest that inflation was higher in 1982 than it is now.
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Inflation is rising and global growth slowing. CNBC Pro reviews recent research to find the top strategist stocks in this difficult environment.
