‘Not bonds or cash, this group of stocks is an effective shelter in times of inflation’
Famous investor on the show “Shark Tank” US – Kevin O’Leary, recently shared with CNBC that, when interest rates rise, investors can use their money effectively by balancing reminds S&P 500 businesses to “set prices” and “maintain margins.”
“Businesses like that abound. They’re good ‘places’ to get a 2 percent dividend,” says O’Leary.
O’Leary’s comments come after the US Federal Reserve (Fed) raised its benchmark interest rate by 0.5 percentage points last Wednesday, in line with market expectations. Fed Chairman Jerome Powell pointed out that a 75 basis point increase in interest rates “is not a possibility that the FOMC is actively considering”, despite the market’s repeated expectations that the central bank will raise rates by a quarter of a percentage point in June. .
O’Leary also does not think the Fed will raise interest rates so aggressively. “The market is still in a bull cycle,” he added. The millionaire said: “I don’t think the Fed will raise interest rates to such a large extent. Many risks are present in Europe such as the conflict between Russia and Ukraine, problems with the supply chain of goods, wheat. “
He added: “There’s a lot of worrying factors around the world. That’s something that I think the Fed will consider really carefully. I think investors should answer the question: “Powell could be Powell.” make a ‘soft landing’? If you think he can, buy the stock.”
“Up until the end of the year, the market is going to be going through a lot of volatility and the Dow will have as many people dropping more than 1,000 points as it did last week,” O’Leary said.
The impact of inflation on cash and rising interest rates on long-term bonds, like the US 10-year Treasury note, also leaves investors with fewer safe options, he said. That’s why he said he will focus on the stock market and buy shares of companies with “pricing power”.
“That’s what keeps investors on their toes and how to effectively protect their capital,” he said. “The stock market is still a good investment in times of inflation. You could argue that the market is still a good investment. The market doesn’t have the ‘pricing power’, but it’s still a better option than long-term bonds and certainly cash.”
When asked where investors can find attractive returns, O’Leary shared that it is in the energy and health sectors. “I think energy is a strong point in bringing dividends to investors, some are going up to 7-9%,” he said.
“Sharks” added: “People are worried about the movement of oil prices. However, the sanctions on Russia will likely keep oil prices at the current high level. Moreover, oil production activities in the US will increase.”
Regarding the medical field, he pointed out that this is a group of stocks that are quite undervalued. “A lot of biotech stocks have fallen sharply because of this correction, but they’re going to maintain their momentum,” O’Leary said.
“For example, Moderna has pretty impressive numbers. I’ve invested in this company, as well as Pfizer. As the economy changes, there are sectors now that are likely to pay off,” he said. dividend yield is very promising for shareholders. I think taking a more conservative view on capitalization and dividend yield won’t lead to a bad ending.”
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