Strategists say the 1980s were the blueprint for the coming era of disinflation, and these are its stocks.


Stocks suffer third straight loss as investors weigh in on new set of data.

It comes after Wednesday’s session and extremely weak industrial production, prompting fears that the economy will lose steam as the Fed continues with rate hikes. Or as CNBC commentator Ron Insana put it:

Ours on this front call of the day Jefferies tackles this idea. “Disinflation is the key assumption for our roadmap to 2023,” said global microstrategy head Desh Peramunetilleke and analyst Mahesh Kedia in a note to clients on Thursday.

“The disinflation period of the 1980s was a result of higher rates and easing
supply-side pressures provide a good template for the current cycle. Overall, quality growth stocks/sectors have outperformed value, while small caps have underperformed,” he said.

Read: JPMorgan CEO Jamie Dimon sees ‘a lot of core inflation’ at 6% in recession

The best performer from April 1980 to February 1983 was consumer, with business services, staples, and consumer services performing better, while commodities and industrials did less well. Buying quality and avoiding value was also a smart move, they add.

As for the here and now, the pair says that while extreme inflation isn’t usually good for stocks, moderate inflation can be a better construct. They note a positive correlation between monthly S&P 500 returns and percentage point changes in US 10-year inflation expectations over the past 20 years.

Jefferies, FactSet, multpl.com

Jefferies, FactSet

“Based on the relationship with the sector [10-year inflation expectations,] materials, energy, infotech and industrials are the sectors to avoid when inflation is low, while staples, utilities, communications and healthcare are in focus,” Peramunetilleke and Kedia said. “Strategically, investors should avoid GARP (growth at a reasonable price), value and returns, and focus on low risk and quality stocks when inflation is falling.”

Reversion refers to the idea that any asset will return to its average price over time.

When it comes to stock ideas, Jefferies has the best disinflation plays to consider. First, those with a negative correlation with inflation – Procter & Gamble PG,
Dollar General DG,
Walmart WMT,
Church and Dwight CHD,
McDonald’s MCD,
Waste management WM,
Costco COST,
Public Storage PSA,
Waste Communications CA:WCN
and Mondelez Intl MDLZ.

They list Visa V under quality stocks at affordable prices,
Home Depot HD,
Broadcom AVGO,
Cisco Systems CSCO,
Linde LIN,
TJX TJX,
Reservation Holding BKNG,
Altria MO,
Boston Scientific BSX
and Ulta Beauty ULTA.

Feedback: Roubini says this perfect big threat storm is more dangerous than the 1970s or 1930s.

Markets

Shares DJIA

SPX

COMP
bond yields opened in the red as BX:TMUBMUSD10Y

BX: TMUBMUSD02Y
it will remain at four-month lows on recession concerns. Dollar DXY
and fat CL
while gold prices GC00 fell modestly
a little higher. European stocks XX:SXXP
Following Wall Street lower, much of Asia JP:NIK
it was also in red.

For more market updates and effective trading ideas for stocks, options and cryptocurrencies, subscribe to MarketDiem by Investor’s Business Daily.

Buzz

Weekly jobless claims fell 15,000 to 190,000 in the latest week, housing starts fell 1.4% and building permits fell 1.6% in December. Elsewhere, the Philadelphia Fed manufacturing index rose to minus 8.9 in January from -13.7 in the previous month.

Three Fed speakers are still to come, starting with Boston President Susan Collins, then Vice Chair Lael Brainard, and then New York President John Williams.

Alcoa shares AA
are losing value in the premarket after reporting a second straight quarterly loss. Procter & Gamble PG
The stock also fell after earnings missed forecasts, but sales disappointed. Allstate shares ALL
fell after the insurer warned of higher catastrophic losses for the fourth quarter thanks to December storms.

Netflix NFLX
and Costco COST
will report after closing.

Netflix’s unexpected finale: Since there is no longer a subscription guide, the focus is on financial calculations

KFC and Taco Bell parent Yum Brands! YUM
Nearly 300 UK restaurants have been hit by a ransomware attack, forcing them to close.

Mastercard MA
CFG will expand its partnership with Citizens Financial Group
To become the bank’s exclusive payment network, companies must announce Thursday.

Also, the US will hit its debt limit on Thursday and what that means.

The best of the web

“I don’t have enough in my tank anymore.” The beloved prime minister, who became the second in the world to give birth to a child while in office, is resigning.

Banked rainwater is a rare benefit of California’s recent deadly and destructive rainstorms.

A 1,000-year-old Tunisian cave village is slowly dying

Graph

Where are the jobs? florida, it seems.

@JosephPolitano

Tickers

As of 6 AM Eastern, the most searched tickers on MarketWatch are:

Ticker

Security name

TSLA

Tesla

BBBY

Bed Bath & Beyond

GME

GameStop

AMC

AMC Entertainment

AAPL

apple

APE

AMC Entertainment Preferred Stock

NIO

NIO

MULN

Mullen Car

AMZN

Amazon

HKD

AMTD Digital

Reads casually

Sprinting legend Usain Bolt lost millions in fraud.

The King of Pain? The day before he was fired, Microsoft hosted a Sting concert

New York restaurants are making time for crazy TikTok menu hacks.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered to your inbox once. An email version will be sent at 7:30 AM Eastern.

Listen to the Best New Ideas in Money podcast with MarketWatch reporter Charles Passey and economist Stephanie Kelton.





Source link