Profit from the recession debate with our ultimate midyear stock-picking guide
At the midpoint of 2023, some investors see a recession storm on the horizon while others see clear skies ahead.
The recession crowd is worried about negative consumer sentiment, while the no-recession camp is heartened by more-positive-than-expected data from the University of Michigan Consumer Sentiment Survey, released in June.
Economic pessimists fret over corporate earnings, but optimists point out that an anticipated earnings apocalypse failed to arrive in the first quarter, when earnings beat expectations. The former worry about more Fed interest rate increases, while the latter point to declining inflation.
Here’s a look at other stories impacting the financial advisor business.
Recessions haven’t always resulted in declining stock markets, and good opportunities can be found amid them. Nevertheless, recessionary business environments generally aren’t good for corporate earnings, and investors’ perceptions are, of course, highly impactful.
Investors convinced that a recession impacting the market is imminent continue to sit on cash. But some of them might be inclined to invest for the long term in sectors unlikely to suffer heavy damage from a receding economy.
Here’s a midyear sector guide for both economic optimists and pessimists.
Sectors for recession naysayers
The best sectors for recession disbelievers are the most economically sensitive ones: industrials, materials and financials.
Industrials, which manufacture finished products for commercial and consumer use, recently have been picking up steam; SPDR Industrial Select Sector ETF XLI was up 8% over the three months that ended in mid-June.
Industrial names with currently low downside risk and good growth potential include: Cintas, Fastenal, Westinghouse Air Brake Co., Cummins Inc., CSX, Emerson Electric, Otis Worldwide, Carrier, Caterpillar, Honeywell, Illinois Tool Works and Lockheed Martin Corp.
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