It’s time to go on defense
Naturally, as the major indices absorbed the news regarding
the Federal Reserve’s upcoming rate hikes for 2022 — and not in a great way —
many folks turned to Cathie Wood. A technology investor and the matriarch of
Wall Street, Wood commands serious influence. And her words were to not deviate
from the course because the truth “will win out.” Still, a slight shift toward
boring stocks to buy might help.
According to CNBC, Wood’s ARK Innovation ETF (NYSEARCA:ARKK)
lost a fifth of its value on a year-to-date basis since the close of Dec. 17.
Under the much often cited narrative of buy low, sell high (or buy the dips in
the contemporary parlance) the fallout in tech and other sectors might inspire
buying sentiment. While that could be true, it’s also possible more pain is on
the way, which bolsters boring stocks to buy.
In an interview with the Wall Street Journal, David Keller,
chief market strategist at StockCharts.com, stated that, “Arguably the reasons
why stocks have been so strong so consistently are now going away and those
conditions are changing.” Some investors — though to be clear, not all — are
concerned about the rapid spread of the omicron variant of the coronavirus. The
uncertainty hinders growth names but may benefit boring stocks.
But arguably the most important impediment to the
once-soaring demand for risk-on assets is the scheduled increase in borrowing
costs. As WSJ noted, “Fast-growing tech names have been pressured by the
prospect of higher interest rates, which make it less appealing to hold riskier
assets.” Therefore, investors should be thinking about reliability and
stability, which boosts the profile of boring stocks.
As well, the conspicuous correction could come down to
common-sense dynamics. While there’s no upside valuation ceiling in theory for
any particular asset, practically speaking, a sector can only go so high before
it stalls out. With growth names having enjoyed a blistering season, it’s time
to reconsider these boring stocks to buy.
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