June 4, 2021
The U.S. economy could be running as hot as ever, particularly when it comes to price pressure. Analysts at BTIG said that sustained periods of core PCE exceeding 2% have resulted in market declines of -1.6% per month. The Fed’s multi-trillion dollar QE programs are starting to engineer that inflation, and outside one-off jobs report employment data and GDP are picking up as well. Analysts said the best buys in this climate are value stocks, low P/Es that have lagged peers year-to-date but have picked up since inflation news. The big names are Colgate-Palmolive, Quest Diagnostics, Humana, Cerner, Bristol-Myers, Pfizer, Realty Income, and SBA Communications. The candidates to stay away from are just the opposite on metrics, high P/E’s and trending negative since inflation. Those names are Generac Holdings, Maxim,
Nvidia, KLA, Microsoft, Arista Networks, Zebra Technology, and TE Connectivity. Increased pressure on bonds and sinking stocks could cause the Fed to address inflation.
FINSUM + Magnifi: Value funds in a hot economy make a lot of sense. They perform well in inflation and
are also more robust to relapse recessions.
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