My top penny stocks to buy today
The first company on the list is the private jet broker Air Partner (LSE: AIR). Over the past two years, this organization has benefited from two substantial tailwinds.
The travel stocks I’d buy (and sell) as Omicron spreads
The rise of the Omicron variant of coronavirus has caused havoc for the international travel industry and travel stocks. Travel bans have upended plans, and new strict testing regimes have smashed consumer confidence.
Since the new variant was discovered, shares in some of the UK’s premier travel companies have fallen by a double-digit percentage. IAG has fallen 20% over the past month, easyJet‘s shares have fallen 15%, and Jet2 has slumped 21%.
However, I think some companies in the industry are better positioned to whether the uncertainty than others. As such, following recent declines, I have been looking for undervalued opportunities in the travel sector.
Travel stocks to buy
Further restrictions will have a clear impact on the travel industry as a whole, but some businesses will feel the pain more than others. IAG, TUI and easyJet could all suffer more than their peers, due to their leveraged balance sheets and lack of competitive advantages.
By comparison, companies like Wizz (LSE: WIZZ) and Jet2 (LSE: JET2) have stronger balance sheets and more visibility among consumers.
Wizz, in particular, stands out to me. I like this airline because it has a cash-rich balance sheet and a relatively modern fleet of aircraft. The modern fleet means costs are lower and it can accommodate more passengers. These are the reasons why I would buy the company, but avoid peers IAG and easyJet.
Jet2 reported a substantial loss of £200m for the six months to the end of September. This was disappointing, but the company has a strong balance sheet, which can absorb losses. Excluding customer deposits, the group’s cash balance at the end of September was £1.5bn.
These numbers suggest to me that the company has the cash resources required to weather the current storm. The resources will also provide firepower for the group to capitalise on the market recovery when it eventually starts to take shape.
Growth potential
This is the primary reason why I would buy the stock over its competitors. Compared to other companies in the sector, like TUI, Jet2 already has a lot of brand value, and it can use its cash balance to boost its visibility to consumers. TUI’s financial position is much weaker. It has been bailed out three times during the crisis by the German government, and further restrictions could lead to yet another cash call.
Like Wizz, Jet2 also has the resources to buy and build a new fleet of aircraft to lower costs and offer a better level of service to consumers. In October, the company announced it had entered into agreements to acquire 51 planes. Wizz is also buying new planes, showing that the business is already looking forward to better times.
Despite their attractive qualities, I am conscious that both Jet2 and Wizz cannot survive if restrictions continue forever. If constraints do continue for the next couple of years, even these companies may start to struggle. This is the biggest challenge they face today.
Despite this risk, I would buy both of these travel stocks from my portfolio today.
Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Why I’d buy the FTSE 100 in 2022
The FTSE 100 is the UK’s leading stock index, but it is not really representative of the UK economy.
More than 70% of the index’s profits are generated outside the country. I think this means it is more a barometer of global economic health.
As the global economy starts to rebuild after the pandemic, forecasts suggest that growth will accelerate over the next few years. And I think investing in the FTSE 100 is one of the best ways to play this trend.
FTSE 100 as an investment
Many investors might not consider the FTSE 100 index as an investment itself. However, in my opinion, it has many of the qualities of a globally diversified fund.
It includes 100 different companies, which are active in various sectors around the world. It offers an average dividend yield of around 3.5%, and investors can buy a low-cost FTSE 100 tracker fund for an annual management fee of as little as 0.1%.
I am more interested in the FTSE 100 today than I was a decade ago because the index’s composition has changed significantly.
Banks and mining companies used to dominate. Today pharmaceutical stocks make up the largest component, accounting for around 11% of the index.
The second-largest sector exposure is the consumer goods sector. Unilever and Diageo are the second and fourth-largest holdings in the index, respectively.
That being said, banks and oil and stocks still have a heavy weighting. These two sectors make up around 20% of the blue-chip index.
These sectors have underperformed over the past two years, but I think they could outperform as the economy begins to recover. Bank profits are already increasing as economic activity grows. Meanwhile, oil prices are back to pre-pandemic levels.
Oil companies are also investing heavily in expanding their presence in the renewable energy sector. As they continue down this path, I think they will attract green energy investors, who are usually prepared to pay a higher price for stocks.
This transition could take a couple of years, but I think it shows the index’s potential.
Risks to growth
I believe the outlook for many of the index’s constituents is improving. Still, I do not think it will be plain sailing for the next year or so.
As the pandemic continues to rumble on, many of the index’s constituents could continue to suffer disruption. This could undoubtedly hold back growth. Additional pandemic restrictions may also force companies to put their plans for expansion on ice and focus on survival.
I would be happy to buy the FTSE 100 as a recovery investment for my portfolio despite these risks. The diversification of the index, coupled with its global footprint, are desirable qualities.
The index also provides additional exposure to economically sensitive sectors, which could register faster growth as the economy recovers. Buying these stocks as part of a diverse portfolio, such as the FTSE 100, can reduce the risk of investing.
Inflation Is Coming: 3 Shares To Try And Hedge Against Rising Prices
Make no mistake… inflation is coming.
Some people are running scared, but there’s one thing we believe we should avoid doing at all costs when inflation hits… and that’s doing nothing.
Money that just sits in the bank can often lose value each and every year. But to savvy savers and investors, where to consider putting their money is the million-dollar question.
That’s why we’ve put together a brand-new special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation…
…because no matter what the economy is doing, a savvy investor will want their money working for them, inflation or not!
Best of all, we’re giving this report away completely FREE today!
Simply click here, enter your email address, and we’ll send it to you right away.
Rupert Hargreaves owns shares of Diageo and Unilever. The Motley Fool UK has recommended Diageo and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
How I’d start investing with £500 today
If I had a lump sum of £500 to start investing with today, I would use a diversified approach. As I enjoy studying businesses and analysing stocks and shares, I would buy a basket of individual stocks for my portfolio.
However, I would also add in some funds for diversification. By using investment funds, I can also increase my portfolio exposure to sectors I may not understand myself.
Start investing with funds
For example, I would buy the Renewables Infrastructure Group fund for my portfolio to invest in renewable energy assets. The fund’s diversified portfolio of such assets offers exposure to different sectors in the space that I may not necessarily be able to find myself.
I have also highlighted the Blue Whale Growth fund in the past. This is another investment fund I would buy for my £500 portfolio to start investing. The fund invests in growth stocks around the world. Its managers are able to spend more time analysing growth businesses than I could, which is why I am happy to invest here rather than picking stocks myself.
Alongside these funds, I would also buy single stocks. As £500 is only a relatively small amount of money, I will concentrate my efforts on my favourite companies.
Two that I believe have fantastic growth potential over the next few years are Moonpig and Future.
Growth stocks
These businesses are some of the fastest-growing tech stocks in the UK, and they both have substantial competitive advantages.
Moonpig has cornered the market for designing and developing greeting cards and gifts. Meanwhile, Future has built a magazine empire, which leverages the company’s exposure to niche audiences to boost advertising.
Both businesses continue to gain market share by developing their existing products. I think that as long as they continue to invest for growth, they will be able to maintain the hold over their respective markets.
However, these are both highly competitive markets. As such, I will be keeping an eye on them to see if they are falling behind the competition. If they cannot keep up with peers, they could start to lose market share. This is the biggest challenge they face today.
Income and value
Another firm I would buy for my £500 portfolio is Royal Dutch Shell. I think shares in the energy company look cheap, and the stock offers a highly attractive dividend yield of 5%.
As the firm moves away from oil and gas towards a greener business model, I think the market will start to re-rate the shares to a higher valuation.
Of course, there is also the risk that the firm will fall behind in the energy transition, and in this scenario, the stock could underperform. Still, despite this risk, I would be happy to add the stock to my £500 portfolio, alongside the investments outlined above.
Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
8% dividend yields! 3 dirt-cheap FTSE 100 stocks I’d buy now
The average dividend yield on the FTSE 100 is just 3.4%. But I’ve found three stocks with 8% yields that I’d be happy to buy for my portfolio today. I’ll look at these stocks in a moment, but first I want to explain why I think they’re looking so cheap.
In my experience, a very high dividend yield can mean a couple of things. One possibility is that the company is unfashionable and slow growing, but still very profitable. Tobacco is the classic example of this in today’s markets. For a value-minded investor like me who also wants income, buying these shares can make sense.
However, some stocks have high yields because the market expects a dividend cut. These are the shares I try to avoid.
I reckon the three companies I’m looking at today all offer sustainable dividends. I already own one of them and would be happy to buy the other two for my Stocks and Shares ISA.
Making good progress
My first 8% yielder is FTSE 100 stock British American Tobacco (LSE: BATS). I admit that this company won’t be popular with all investors. But BAT’s business has proved surprisingly long-lived. Despite a global decline in smoking rates, it continues to generate stable profits and generous cash flows.
BAT brands such as Camel, Rothmans, and Lucky Strike are familiar the world over. But the company doesn’t plan to rely on them forever. Investment in non-combustible products such as vapes has increased and is starting to deliver results.
The number of customers buying so-called new category products rose by 3.6m to 17.1m during the first nine months of this year. Although that’s still a small number compared to the number of people who smoke cigarettes, I think it’s a decent rate of growth.
CEO Jack Bowles says that BAT’s new category business is on track to become profitable by 2025. From that point onwards, profits from products such as vapes should help to offset any weakness in tobacco sales.
In the meantime, BAT’s 40% profit margin means that it’s generating enough cash to support the dividend and fund a gradual reduction in debt.
The main risk I can see is that smoking rates will fall faster than expected, perhaps because of tougher regulation. If younger generations keep away from nicotine altogether, then the outlook could become very gloomy.
I’m not taking an ethical view on this, but in practical terms I think it’s unlikely. In my view, BAT’s 8% dividend yield is likely to remain safe for the foreseeable future.
A golden 8% yield?
My second pick is FTSE 100 gold miner Polymetal International (LSE: POLY). This business owns and operates a number of gold mines in Russia and Kazakhstan. The firm is something of a family business. Around 24% of the stock is owned by Russian billionaire Alexander Nesis, who is the brother of chief executive Vitaly Nesis.
I’m usually cautious about investing in Russia, due to the political risks of this unusual market. But Polymetal has been listed on the London market since 2011 and has a solid track record, in my view.
Between 2011 and 2020, Polymetal’s annual profit rose from $289m to $1,086m. Some of this growth was due to the gold price rising from 2018 onwards. But some is due to underlying growth in the business, as new mines have started up.
Polymetal produced 851,000 gold equivalent (GE) ounces in 2011. The company’s guidance for 2021 is 1.5m GE ounces.
While production has grown, costs have remained fairly stable — and low. Polymetal’s total cash cost of production was $701 per ounce in 2011. The figure for 2021 is expected to be between $750 and $800 per ounce.
These are relatively low costs for a gold miner, in my experience. With gold trading at $1,785 per ounce as I write, it’s clear that Polymetal should be generating plenty of cash.
The company’s policy is to return cash to shareholders as dividends. When gold prices are high, these dividends are generous. This year’s forecast payout of $1.35 per share gives a yield of 7.8% at current levels, for example. Next year’s payout is expected to be higher.
The flipside of this situation is that shareholders cannot expect stable long-term dividend growth. When the gold price crashes, as it did in 2014/15, the dividend is likely to be cut. I’m happy to accept this risk, but it’s certainly not something to ignore. In my view, the cyclical risk here is one of the reasons why Polymetal’s yield is so high.
An unloved 9% yielder: too cheap?
My final pick is a company that’s been through some big changes in recent years. Fund manager M&G (LSE: MNG) was previously part of insurer Prudential. M&G was spun out into a new FTSE 100 business in October 2019.
The performance of the business has been sluggish in recent years, but I think it’s showing signs of improvement. M&G’s adjusted operating profit rose by 6% to £327m during the first half of this year. Meanwhile, the value of the group’s assets under management edged up to £370bn during the period.
Of course, the first half this year saw broad increases across the UK stock market. I’d expect a fund manager’s performance to improve in these conditions. I’ll be keen to see if M&G has held onto its gains during the second half of the year, which has been much more difficult for investors.
This isn’t an easy business to analyse, as M&G’s profits depend on stock market performance and the level of inflows and outflows from its funds. Even so, I think the shares are priced very cautiously at the moment.
Broker forecasts price M&G shares on 8.5 times 2021 forecast earnings, with a 9.3% dividend yield. Unless the company’s performance goes horribly wrong, I think the shares have the potential to move up from these levels in 2022. This is certainly a stock I’m watching as a potential bargain buy.
5 Stocks For Trying To Build Wealth After 50
Markets around the world are reeling from the coronavirus pandemic…
And with so many great companies still trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.
But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.
Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…
You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.
That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.
Click here to claim your free copy of this special investing report now!
How I’d build passive income with just £150 a month
In the 1987 movie Wall Street, Gordon Gekko famously says that “money never sleeps”. I’m not sure if Gekko was thinking about passive income when he said that, but these words certainly ring true for me.
My portfolio of dividend shares continues to produce income through the year, even if I ignore it altogether. I’ve been following this approach for years. But today, I want to explain how I’d start a passive income fund from scratch with just £150 a month.
How I’d invest
To invest a small amount each month, I’d use a regular investment service. Many popular brokers now allow monthly investments as small as £25. If I was investing £150 each month, I could theoretically buy six shares at £25. In reality though, I might not do this, as I’d want to minimise the fees I was paying.
For example, if I was paying a trading fee for each stock, I’d probably buy two stocks each month, putting £75 into each. After three months, I’d switch my regular investment to two new stocks. And so on.
By the end of the first year, I’d have eight different dividend stocks. After two years, I’d have 16. I generally aim for a portfolio of 15-20 stocks, so I’d then be in a position where I could start buying more of the shares I already owned.
Turbo charging my passive income
After the first year, I’d expect to see a regular stream of dividends arriving in my Stocks and Shares ISA. What I’d do then is to start using this dividend cash to buy more shares, in addition to my regular monthly investments.
Reinvesting dividends can be a powerful way to build wealth. By doing this, I’d be using today’s income to buy extra income in the future. Over time, this technique — known as compounding — can deliver big gains.
Warren Buffett once said that “the stock market is a device to transfer money from the impatient to the patient”. When he said this, I’m pretty sure that he was thinking about compounding.
Shares I’d buy for passive income
What kind of stocks would I buy for my passive income portfolio? I’d start by focusing on the FTSE 100, because these larger companies are well-established and usually offer some of the highest yields on the market.
One of the main risks with a passive income strategy is that dividends will be cut. As we saw last year, this can happen anytime, for a variety of reasons.
To try and provide some protection against future dividend cuts, I’d look for payouts that were comfortably covered by earnings. I’d also aim to build a diversified portfolio, without too many cyclical stocks. That way, even if I had a bad year (like 2020), I’d still expect to get some income from my portfolio.
Looking at the market today, I’d probably focus on sectors such as consumer goods, insurance, defence, technology, and utilities. My aim would be to find businesses with pricing power and stable long-term prospects.
I’d be more careful about cyclical sectors, such as housebuilding and mining, which have enjoyed booming market conditions in recent years. The good times may not last forever.
Once I’d made my choices, I’d leave my portfolio alone, just checking in occasionally to reinvest my dividends.
5 Stocks For Trying To Build Wealth After 50
Markets around the world are reeling from the coronavirus pandemic…
And with so many great companies still trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.
But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.
Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…
You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.
That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.
Click here to claim your free copy of this special investing report now!
Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Help Me Retire: I’m 62, unemployed, living off my savings and waiting on Social Security — ‘Can I go fishing for the next 25 years and forget about work?’
Hello MarketWatch,
I am a 62-year-old single male and have no children. I decided three years ago to quit work and enjoy my life instead of working in the office from 7 a.m. to 5 p.m. every day. I am still concerned whether I made the right choice and whether or not I need substantial income to ensure my golden years.
Currently, I am living off of my savings accounts. If I sold my home today I would net $1 million. I have $508,000 in retirement savings, $660,000 in savings (collecting minimal interest) and $441,000 in my brokerage/trading account. I have yet to declare my Social Security and plan on living off of savings to maximize my Social Security and collect at my full retirement age. At that time, when I turn 66 years and 10 months, I will collect $3,100 per month.
My current monthly bills are $5,500 and multiplied over the next 58 months total $319,000 of expenditures (including health insurance). I do have dividend paying stocks paying $660 per month (or $8,000 per year).
My question is, can I go fishing for the next 25 years and forget about work or go back to the grind for a couple of years?
Thank you.
Dear reader,
I’ve got good news for you. At first glance, it appears you can continue to go fishing for the next 25 years as a retired man. But before you go get your fishing rod and bait, I’d like you to consider some options to ensure you have a comfortable, secure retirement and old age.
If the level of expenses you provided is accurate, coupled with moderate inflation and an estimated investment growth rate of net 6% to 6.5%, your strategy should be able to hold you over until Social Security and then some, said Brian Robinson, a certified financial planner and partner at advisory firm SharpePoint.
“There are enough assets with different taxable circumstances that, if allocated correctly and in the correct types of vehicles, will achieve a sustained retirement through at least age 90,” Robinson said. At first, your withdrawal rate will be higher than average, which will obviously draw down your assets faster, but when Social Security kicks in, that rate will taper.
While this definitely sounds like a win, there are ways to improve your situation.
For example, you have a substantial amount of money in your savings account. It is absolutely wonderful that you’ve got this much stashed away and easily accessible, but keep in mind that inflation will hurt the purchasing power of that money later in life. Robinson suggests looking into an investment vehicle that will provide an income guarantee at a certain age.
You could also consider converting a portion of your retirement savings into a Roth individual retirement account this year, though you should consult with a financial professional about the best way to do so.
Check out MarketWatch’s column “Retirement Hacks” for actionable pieces of advice for your own retirement savings journey
Putting the money in an investment account may sound scary, especially as you intend to live off of it for the next few years alone, but if you invest it conservatively it has a better chance of yielding more income for your portfolio than the interest accruing in the bank account, said Todd Scorzafava, principal and partner at Eagle Rock Wealth Management. If you went this route, you should still retain a healthy amount in your regular savings account — at least 12 months worth of expenses.
There are a few strategies you can take to withdraw your money as well, Scorzafava said. For example, the “bucket” approach divides your assets into multiple categories. One is allocated super conservatively, as it would be the first account you dip into. The second would be a little less conservative, with a longer time horizon so there is opportunity for investment returns. The other buckets would continue on that trajectory, being slightly more aggressive, with an even longer time horizon. Ideally, you would not touch those other accounts unless absolutely necessary.
By the way, delaying Social Security to your Full Retirement Age makes a lot of sense, as it will get you 100% of the benefit you’re owed. If you find when you get to your full retirement age that you’re still comfortable, you may even want to hold off longer — the longer you wait up until age 70, the more you get in your monthly checks. But don’t make your decision solely on that fact alone. There are a considerable number of factors to think about when deciding when to claim Social Security, including health and longevity and current or projected future expenses.
Also see: We’re in our 60s and have millions of dollars for retirement — should we rent or buy our next home?
Of course, a financial planner and/or a tax professional could point you in the right direction as to how to move around your assets, what a safe asset allocation would be for your investments, and how to make your money work for you without ending up with a hefty tax bill. A planner could also help you create a comprehensive financial plan and account for any gaps that you may have unknowingly overlooked. And, if the time ever comes that you want to sell your home, they could help with the financial consequences of that event as well.
“Does the retiree have any goals they want to accomplish, do they want to travel, take any vacations, are they in good health, do they have proper health coverages and care, do they have an eventual plan for the things caught in the ‘doughnut hole’ that Medicare will not cover effectively?” Scorzafava said. “All of these questions are critical in order to build out your road map to and through retirement.”
So yes, head over to the water for a nice day of fishing whenever and however often as you’d like — just don’t forget to shore up your finances so they’re working to their fullest potential while you’re out there.
Readers: Do you have suggestions for this reader? Add them in the comments below.
Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com
1 dirt-cheap FTSE 100 stock I would buy NOW!
Investing in FTSE 100 stocks is not without its challenges. When I look to buy cheap stocks, I find that many of them are cheap because they have unclear prospects. Or they might not have given solid capital gains to investors for years, which is why they are still cheap. Occasionally though, I might get an opportunity to buy a really fast growing stock at a really low price.
The example I have in mind is athleisure retailer JD Sports Fashion (LSE: JD). The stock has seen stellar growth over the past few years. If I had bought the stock five years ago, I would be sitting pretty on a capital gain of 250%! This roughly translates to a 50% increase every single year. That is saying a lot, especially considering that in the interim there was the big coronavirus interruption.
JD Sports Fashion looks cheap after a stock split
So how is the stock still cheap? The company recently did a stock split. Each share was divided into five shares, which has naturally led to a drastic drop in the per share price. As I write, the share price is just 220p. I reckon that if the stock markets were to crash, it might even become available as a penny stock. After all, it did lose more than half its value within a few days as coronavirus fears grew in March last year. If an event like that were to happen again, I would load up on the stock a bit more.
Share price expected to rise for the FTSE 100 stock
I also feel confident about JD Fashion’s prospects. It has been a high performer for years now, and has even stayed profitable despite the pandemic. It also sounded confident of its future in its latest results, released a few months ago. Moreover all analysts believe that its share price will rise in the next 12 months. As per data compiled by the Financial Times, even the most pessimistic analysts expect that its share price will rise 2% in the next year. On average, they expect it to rise by 11% and the most optimistic ones actually believe that a 36% increase is in store for the stock.
What could go wrong
While all forecasts are subject to changes, depending on incoming developments, they do give me a good indication of how things look for the FTSE 100 stock based on the information available so far. At the same time, I am keeping a close watch on the pace of the recovery. The UK economy’s progress has been muted in recent months. And the latest growth data, released earlier today, is no different. With the Omicron variant still a potential health threat and increased coronavirus restrictions, the recovery could remain challenged. While the UK is not the only big market for JD Sports Fashion, it is one of the big ones. And what happens here could impact its fortunes.
My assessment
Given its ability to bounce back as well as the growing trend towards online shopping, though, I am still quite positive on the FTSE 100 stock. In fact, I loaded up on it soon after the stock split happened!
Manika Premsingh owns JD Sports Fashion. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Market Snapshot: How far will ‘Powell’s new hawkish tilt’ go? Here’s what investors will be looking for from the Fed’s meeting next week
Investors will be focusing their attention on the Federal Reserve’s meeting next week, searching for details on a potentially hawkish pivot in monetary policy in the face of high inflation.
Fed Chair Jerome Powell — whose hawkish signal during his testimony before the Senate Banking Committee at the end of November rattled markets — is scheduled for a press conference Wednesday after the conclusion of the central bank’s two-day policy meeting.
“This meeting is really about seeing how far Powell’s new hawkish tilt will go,” James McCann, deputy chief economist at abrdn, said in emailed comments this past week. “We expect the Fed to announce a faster pace of tapering, which will act as the main signal that the central bank’s tolerance for surging inflation has been exhausted.”
U.S. inflation rose again in November, increasing the annual rate to 6.8%, the highest in nearly 40 years, according to consumer-price index data released Friday by the Department of Labor. That’s the highest pace of inflation since 1982, when Ronald Reagan was U.S. president.
Read: Highest U.S. inflation in nearly 40 years will force Federal Reserve’s hand
“The Fed is running out of time,” said Tom Graff, head of fixed income at Brown Advisory, in a phone interview. “These inflation reads need to show a clear deceleration, or they’re going to wind up hiking as soon as the tapering is over.” Graff said he expects the Fed may raise its benchmark interest rate three times next year, potentially beginning as soon as April.
The central bank will “probably double the pace” of tapering its monthly bond purchases, said Liz Ann Sonders, chief investment strategist at Charles Schwab, in a phone interview. That means tapering would end in March instead of June, she said.
The pace of increase in interest rates will be important to the stock market as it tends to fare better in a slower tightening cycle, according to Sonders.
A slower pace might mean the Fed raises rates many times in a cycle but, say, every other policy meeting, she said. Sonders said markets have priced in about three rate hikes for 2022, which is above the two that she’s expecting — at least at this stage.
Next week investors will get a view of the so-called dot plot showing rate-hike projections made by members of the Federal Open Market Committee, after the Fed’s policy meeting scheduled for Dec. 14 -15 concludes.
The “updated dot plot will likely reveal a pull forward in the dots, with a median trajectory of 2 hikes in 2022, and 3 hikes in both 2023 and 2024,” wrote Bank of America economists in a BofA Global Research note Friday. “That said, Chair Powell may be noncommittal about the timing and point to omicron uncertainty.”
The stock market became jittery after the new omicron variant of the coronavirus emerged, fearing it could hurt the economic recovery during the COVID-19 pandemic. Early this month, the Associated Press reported that multiple cases of omicron have been detected in New York.
But on Friday, stock-market investors appeared to have shaken off concerns over omicron and surging inflation. All three major benchmarks closed higher to score gains for the week, with the S&P 500 index
SPX,
finishing at a fresh peak.
In the bond market, the yield on the 10-year Treasury note
TMUBMUSD10Y,
was little changed Friday at 1.487%, but its rise of 14.5 basis points for the week marked its largest weekly gain since February based on 3 p.m. levels, according to Dow Jones Market Data. Treasury yields and prices move in opposite directions.
“Strong economic growth, labor market recovery and elevated inflation has clearly moved the Fed toward an accelerated focus on shifting policy and particularly in getting quantitative easing over with,” said Rick Rieder, BlackRock’s chief investment officer of global fixed income and head of the asset manager’s global allocation investment team, in an emailed note Friday.
“That shift is long overdue, and clearly it will also provide the Fed with much needed optionality for moving interest rates higher relative to what is likely to be persistently high levels of demand and still strong inflation prints in the first few months of next year,” Rieder said.
Later next year, inflation may start to fall, according to some analysts. While “sticky inflation” remains a risk, the easing of supply-chain constraints by the end of March should help “slowly” bring the rise in the cost of living down to “more comfortable levels,” Rieder wrote.
“Headline and core CPI are likely to be in the 2% to 3% range by the end of 2022,” he said, referring to the consumer-price index. Core CPI omits volatile food and energy costs.
Barry Gilbert, asset allocation strategist for LPL Financial, also expects inflation over the next year to fall “decisively lower,” according to an emailed note Friday. “We see a first quarter peak in inflation, Fed bond purchases to end in March/April, and liftoff potentially in September 2022,” he said in the note.
NewsWatch: These 6 overvalued stocks are making the S&P 500 look more pricey than it really is
From Powell and Dole and Rumsfeld to Aaron and Lasorda and Spinks — a roll call of the most noteworthy deaths of 2021
Other notable departures of the year ranged from Walter Mondale to Rush Limbaugh, Eli Broad to Bernie Madoff, along with such entertainment giants as Cicely Tyson, Olympia Dukakis, Cloris Leachman, Charles Grodin, Ed Asner…