BY KRISTIN HOVENCAMP
At its December meeting, the chairman of the Federal Reserve, Jerome Powell, announced that the run of easy monetary policy measures taken since the beginning of the pandemic are winding down. Powell indicated that once the monthly bond buyback program ends in early spring, the Central Bank will target three .25 interest rate hikes in 2022. With the Federal Open Market Committee’s “forward guidance” in hand, our favored S&P 500 stock index equity sectors are as follows:
Financials. A positive economic recovery, the tapering of monthly bond purchases, and the signaling of an upcoming interest rate hike all favor companies listed in the financial sector.
Consumer discretionary. Low unemployment, high savings rates, strong credit, and job openings boost stocks representing nonessential goods and services. As consumers feel more secure spending money, discretionary products and services tend to outperform.
Industrial goods. Best levered to economic recovery. Supply backlogs, low inventory levels, and elevated demand for new orders help the diverse industrial sector.
Communication services. Well-positioned to benefit from increased global connectivity. Metaverse trends should present opportunities over the coming years.
Energy. The sector has outperformed the overall market over the past 12 months. However, patience is vital as we continue to assess the regulatory and economic environment.
Information Technology. Global demand for technology and future rollouts should drive sector growth, albeit slower than in 2021.
Healthcare. This defensive sector is well positioned for short- and long-term trends of growth. Research and development should help sector momentum.
Real estate. Traditionally defensive and interest-rate sensitive, Real Estate Investment Trusts offer portfolio diversification. Select REITs are seen as attractive, offering higher dividends.
As we ring in 2022, keep a close watch on GDP and inflationary measures to determine if what the Fed says is in line with their actions. Happy New Year.
HAZLETT WEALTH MANAGEMENT, LLC is independent of Raymond James and is not a registered broker/dealer. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Sector investments are companies engaged in business related to a specific sector. They are subject to competition and their products and services may be subject to obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification. HAZLETT WEALTH MANAGEMENT, LLC is located at 675 Sun Valley Road, Suite J1 + J2 Ketchum, Idaho 83340 208.726.0605. HazlettWealthManagement.com