Investment Strategist Expects Close Tug-of-War Between Bulls and Bears – Investors Can Still Win With These 12 US Stocks

Doll: Inflation has peaked, but remains at a high level
The Fed’s restrictive monetary policy could cause a US recession in 2023
Doll particularly recommends financials, energy stocks, as well as Microsoft and Apple

Doll has been an investment manager at prestigious companies such as Merrill Lynch and BlackRock. Last year, the sought-after American took up a new position at Crossmark Global Investments after retiring. For this company, he highlights the most important topics on the stock market and makes highly regarded forecasts about further stock market developments.

Doll: The highest inflation rates are probably behind us

Doll firmly believes that inflation will peak in the coming weeks or has already peaked in April. For the end of 2022, the investment strategist expects an inflation rate of 4 percent. Although delivery bottlenecks would gradually decrease, inflation would remain above the target of 2 percent per annum. Wages will rise by 6 percent, productivity by 2 percent – resulting in inflation of 4 percent. For this reason, the US Federal Reserve will continue to raise interest rates over the coming months.

Doll sees the probability of a recession in 2023 at 50 percent

Such a restrictive monetary policy by the Fed could, in turn, significantly worsen the currently healthy state of the US economy. Doll estimates the probability of a recession at the end of 2023 at 50 percent. This year, however, the economy in the USA will continue to grow. Interest rates – taking the inflation rate into account – remain negative, which has a stimulating effect on the economy. Consumers also have $2.5 trillion in excess cash accumulated during the coronavirus pandemic that they will spend in the near future. But these two positive factors would expire in 2023 – and then a 2023 bear market could result.

“Tug of War Between Bulls and Bren”

For 2022, however, Doll is significantly less pessimistic. Rather, he expects the S&P 500 to close at 4,550 points by the end of 2022, a gain of 5.8 percent compared to the current level of 4,300.17 points (close on May 4, 2022). The broad American index has already seen this year’s extremes at just under 4,800 points at the beginning of January and slightly less than 4,200 points in March, Doll predicts. In view of the overall gratifying US reporting season, he emphasizes: “If the S&P 500 were just over 2,200, I would buy,” quotes “MarketWatch” from the stock market veteran.

Overall, however, Doll sees a “trendless” development for the rest of the year. There is a pronounced “tug of war between bulls and bears”. The former highlight good corporate numbers and low US unemployment, while the latter focus on problematic macroeconomic factors such as inflation, interest rate hikes and geopolitical risks. However, investors could only end the year with a decent profit through a targeted stock selection. Which shares does Doll recommend here?

Energy companies: Still promising despite strong performance

In general, Doll continues to recommend value stocks. It is true that these have already performed significantly better than growth stocks in recent months. But the investment strategist believes “only about half of the value advantage has been exploited via the growth sector.”

The traditionally undervalued oil companies are among the classic value stocks. These have already performed very well this year – but Doll sees further price potential in the medium to long term. However, he himself will first wait for the energy company rally to calm down. His favorite companies in this industry: Marathon Petroleum and ConocoPhilips.

Financials: Below their long-term valuation levels

Other cheaply valued value stocks can be found in the financial sector. Financial stocks are in the low double-digit price-earnings ratio (P/E), while the overall market’s P/E is “in the high teens.” From this, Doll concludes that financial stocks are valued at only two-thirds of the broad market, whereas this ratio is historically 80 to 90 percent. In addition to the low valuation, the increasing interest rates also speak in favor of the financial sector.

Doll finds the major bank Bank of America, the payment service providers Visa and MasterCard, and the insurance companies MetLife and Aflac particularly attractive.

Technology sector: Differentiation essential

Within the technology sector, Doll distinguishes between three types of companies. First, there are the comparatively undervalued tech companies that are already making profits today, but are growing at a slower rate. These did not suffer particularly from high interest rates. Doll’s favorites among this group: Intel, Applied Materials, and Cisco.

Under the second group, Doll summarizes the already extremely profitable but still growing mega-cap tech stocks. In this group, Doll prefers the giants Apple and Microsoft, but advises against investments in Amazon, Netflix and Meta.

According to Doll’s definition, the third group consists of mostly unprofitable companies that promise high growth in the coming years. Many of these titles, such as Teladoc Health recently or Delivery Hero in this country, have already sold off heavily. Despite the lower prices of this company class, Doll does not recommend entry. These stocks suffered particularly badly from the environment of rising interest rates.

Editorial office finanzen.net

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