Warren Buffett says never to hold money during a war. Here’s a stagflation playbook for stocks.
The mood is squarely risk-off, with crude and other commodities soaring after US officials raised the possibility of Russian oil sanctions. That’s as the world faces an ever-worsening humanitarian crisis in Ukraine, where the Russian invasion has reached day 12 and more than a million people have fled the fighting.
Against the backdrop of unpredictable and dangerous geopolitical upheaval, here is some wartime investing advice from Berkshire Hathaway’s BRK
Warren Buffett, from an interview in 2014, the last time Russia invaded Ukraine.
“The one thing you can be quite sure of is if we went into some very major war, the value of money would go down ̵[ads1]1; that’s happened in virtually every war that I’m aware of. The last thing you’d want to do is hold money during a war, ”he said.
Buffett bought his first stock in 1942, when “macro factors were not looking good,” but insisted investors would frankly “be a lot better owning productive assets over the next 50 years” than pieces of paper.
Read: BCA analysts say a nuclear apocalypse may take us all out, but bet on stocks anyway
His words might seem to find little takers this morning, but for those unafraid to put a few dollars to work, our call of the day from the Stuck in the Middle blogger “Mr. Blonde ” offers up a stagflation playbook.
Fears of rising inflation and slowing growth, partly driven by the COVID-19 pandemic, were weighing on some investors’ minds before a war in Europe drove a spike in commodity prices. Even if the fighting resolves, “there’s a risk the damage is already done. Stay defensive and lightly risked, ”Mr. Blonde advised.
The blogger looked at past stagflation episodes as measured by US manufacturing purchasing managers indexes and year-over-year OECD G-7 core consumer prices dating between 2019 and 1960. He found markets were in this situation 31% of the time.
Mr. Blonde deduced the best relative performances during stagflation were from defensives, such as pharmaceutical healthcare equipment and services, utilities, food and tobacco, and even defensive tech, such as software.
And if we’re talking reflation, healthcare equipment and services, food and tobacco, energy and software do well in both those regimes, while automobiles and diversified financials do not. Consumer services, meanwhile, do better than consumer cyclicals during stagflation.
As for stocks, the blogger screened for “large cap, high profitability, no extreme balance sheet leverage, good growth / momentum with focus on both estimate revisions and price momentum, and reasonable valuations with focus on FCF [free cash flow] yield. ”
The aim is idea generation and a starter for investors looking for longs, he said, but cautioned that some stocks on his list will have “other issues and idiosyncratic drivers that overwhelm whatever macro regime resilience they may have.”
“Stuck in the Middle” blog
The top five are Alphabet GOOGL,
Meta Platforms FB,
DR Horton DHI,
NVR NVR
and Genuine Parts GPC.
You can see the whole list and blog here.
The buzz
Comments from Secretary of State Antony Blinken were driving a massive oil-price surge that began late Sunday. Blinken said US and European officials are discussing a potential ban on Russian oil. Some point out how there might have been missteps here:
An estimated 1.5 million people have fled the fighting in Ukraine, as Russia offered a third cease-fire for Monday following two failed attempts over the weekend. But Ukraine has rejected that, as some of those routes lead to Russia and Belarus. Meanwhile, delegates are headed for fresh talks on Monday.
American Express AXP,
Visa V,
Mastercard MA,
Netflix NFLX,
TikTok and KPMG add to the list of companies halting operations in Russia over its invasion of Ukraine and crackdown on the media.
Bed Bath & Beyond BBBY
shares are up 38%, on news Chewy CHWY
co-founder Ryan Cohen was taking a big stake and pushing for changes.
Global COVID-19 deaths have hit six million, with remote islands now suffering infection waves and a war-driven refugee crisis in Europe also posing risks.
The markets
Stock futures YM00
ES00
NQ00
are slumping, with European XX: SXXP
and Asian markets deep in the red, as oil prices CL00
BRN00
at 2008 highs. The entire commodity sector is climbing, including natural gas NG00
on both sides of the Atlantic, and all-time highs for wheat W00
and palladium PA00.
On the haven front, gold GC00
is above $ 2,000 an ounce, the dollar DXY
and Swiss franc USDCHF
are climbing and the euro EURUSD
is tumbling.
The chart
@callum_thomas
The tickers
These were the top searched stock tickers on MarketWatch as of 6 am Eastern.
| Ticker | Security name |
|
TSLA |
Tesla |
|
GME |
GameStop |
|
AMC |
AMC Entertainment |
|
BBBY |
Bed, Bath & Beyond |
|
NIO |
NIO |
|
CEI |
Camber Energy |
|
AAPL |
Apple |
|
MULN |
Mullen Automotive |
|
IMPP |
Imperial Petroleum |
|
INDO |
Indonesia Energy Corp. |
Random reads
Along with a plea for peace, singer Sting revives an 80s hit he hardly ever played.
A trucker “freedom convoy” hit the US capital over the weekend. Not everyone was impressed.
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