It’s easy to get discouraged when you see negative stock market headlines.
“The worst start to a year in recent history.” — “Broad selling erases trillions in wealth.” — “Stock market losses cause panic for retirees.”
Sure, it’s been a challenging start to the year. But that’s the way the stock market works! Some seasons are calm and easy, and others carry more risk (and more opportunity).
But don’t let the market cause you to swear off investing. After all, putting your money in a savings account won’t even come close to offsetting inflation.
Instead, take a closer look at individual areas of the market.
Figure out what’s working, and start buying stocks that fit in these categories.
You know what’s working in today’s market? Energy stocks!
Energy Stocks: No Bear Market Here!
While many areas of the market have been under pressure, energy stocks like oil and gas companies have been grinding steadily higher.
Take a look at the S&P Energy Fund (XLE) below!
The global economy is recovering from the coronavirus pandemic. And while that recovery has been uneven with the occasional setback, there’s no denying that things are getting back to normal.
That means demand for oil and natural gas is also getting back to normal.
Meanwhile, supplies of important energy resources have hit some of the lowest levels seen in years. And there are plenty of reasons why:
- Underinvestment in new production (a.k.a. killing capitalism)
- Geopolitical tension (a.k.a. Russia invasion of Ukraine)
- Pipeline friction (a.k.a. “not in my backyard”)
Add it all up, and you’ve got the perfect situation for higher oil prices, and higher energy stocks!
Investors have plenty of options in this area.
You can buy pipeline stocks, oil and natural gas producers, liquified natural gas (LNG) terminals and even oil service stocks (companies that help with oil and gas logistics).
As an investor, you’re not required to lose money when the market pulls back. Instead, consider adding more exposure to the strong areas of the market that are still working well.
Now, let’s shift gears and take a look at some market research for this new trading week.
Energy Stocks In Play
- ABC: Diesel prices hit seven year high.
- Higher prices for fuel, tires and other costs driving transportation prices higher.
- Today it costs about $600 to re-fuel a semi truck with diesel.
- Bloomberg: European gas storage is half empty.
- Underground storage of gas reserves are at lowest level for the season.
- Typically gas inventories don’t fall to half-full until early to mid-February.
- Low temperatures are causing demand to spike aside from geopolitical moves.
- Reuters: Oil hits 7-year peak on political risks, supply crunch.
- Last week was the sixth consecutive week of rising oil prices.
- US crude closed last week at $86.82 per barrel, Brent above $90.
- Producers such as OPEC and Russia allies struggle to increase production.
- Reuters: U.S. drillers add oil and gas rigs for record 18th month.
- The oil and gas rig count hit 610 in the week ending January 28.
- This is the highest level since April of 2020
- Production slipped in 2021 as energy firms returned capital to investors.
- FXEmpire: Natural gas prices surge on LNG flows.
- Traders in the Gulf were purchasing spot gas to transport to Europe.
- Meanwhile, cold weather in the south drives demand for pipeline gas.
- Natural gas flows to the LNG export terminal in Louisiana are setting records
Investors Watch Deals / Earnings
- Bloomberg: SPAC Wipeout spurs sponsors to pull IPOs.
- Dealmakers aborted at least 14 planned listing this month.
- Too much money has already been raised — the SPAC craze is over.
- FactSet: More companies beating earnings estimates.
- Companies are beating EPS estimates but by a smaller margin than average.
- 33% of S&P 500 companies have reported results for Q4 2021.
- 77% of these reported earnings above estimates.
Crypto: Buying Opportunity Or “The End?”
- Bloomberg: Fidelity files to start ETFs tied to metaverse.
- Fidelity filed with U.S. Securities & Exchange Commission to create two ETFs.
- The ETFs will will track stocks engaged in metaverse and cryptocurrencies.
- Crypto companies, block chain technologies, digital payments included.
- Axios: Crytpo leads to massive surge in online scams.
- Investment-related scams on social media represented 37% of losses.
- People ages 18 to 39 were twice as likely to lose money on scams.
- 9 out of 10 named Facebook or Instagram as platform where fraud began.
- CNBC: Kim Kardashian and Floyd Mayweather sued over alleged crypto scam.
- Suit accuses the celebrities of artificially inflation the price of EthereumMax.
- EthereumMax has lost 97% of its value since early June.
- The cryptocurrency was accepted as payment for Mayweather fight tickets.
- CoinDesk: Analysts point to risks in DeFi.
- Underperformance in altcoins and DeFi tokens indicates heightened risk.
- Traders are rotating out of speculative digital assets and into Bitcoin.
- Tokens created by Daniele Sestagalli are off sharply in the last 24 hours.
- CoinDesk: DeFi users fret “contagion risk” with possible stablecoin depegging.
- Investors selling cryptocurrencies is putting pressure on stablecoins.
- As the potential risks for these securities mount, more investors could exit.
- This risks becoming a self-fulfilling prophecy, driving “safe” positions lower.
It’s the Economy, Stupid!
- MW: Pending home sales slump as housing supply dwindles.
- Pending home sales were off 3.8% for the month, 6.9% year-over-year.
- Low supply leaves potential buyers with very few options.
- The future supply of homes should improve as construction activity surges.
- Barron’s: Consumers feeling the pinch of inflation.
- Consumer sentiment fell to the lowest reading since November 2011.
- Inflation and Omicron are pressuring consumer spending.
- Higher gas prices, grocery prices and rents leave less spending cash.
- WSJ: American’s finances got stronger in the pandemic.
- Trillions in government stimulus helped many families reach financial security.
- Americans built up $2.7 trillion in extra savings.
- Americans of all income levels set aside more money during the pandemic.
- WSJ: Steel market cools as supplies expand.
- Steel production in the U.S. rose by 19% last year from 2020.
- Prices have fallen by more than one-third from last year’s record highs.
- Steel has been a major source of cost inflation for manufacturers.
- Bloomberg: Threat of 50 basis point hike.
- The bond market is now bracing for five hikes in 2022.
- Jerome Powell didn’t confirm the Fed’s hiking cycle would be “gradual”.
- Traders are pricing in the potential for a 50 basis point hike in March.
- Reuters: China’s January factory activity contracts as lockdowns bite.
- China’s factory activity contracted by the most in 23 months.
- The central bank already started cutting rates and adding liquidity.
- Demand also took a dive, new orders fell.
