With so much doom and gloom in the headlines, it’s hard to get a clear picture…
We tend to read negative news. Then, we read some more. And then, even more after that.
The mainstream media often feeds into our cravings as well. Each headline is worse than the last one. And they’re all designed to illicit shock, outrage, and fear.
This endless barrage of negativity is officially recognized, too…
It’s called “doomscrolling.”
The Oxford English Dictionary made doomscrolling one of its “Words of an Unprecedented Year” in 2020. And as you might imagine, it’s linked to poor physical and mental health.
For us as investors, this type of behavior can have serious repercussions…
Doomscrolling gives us all sorts of reasons not to invest. But if we sit on the sidelines too long, we could miss out on the types of returns that our portfolios need right now.
After all, even if inflation is down from its peak, it’s still high. In the current environment, just sitting in cash means we’re losing money at an annual pace of roughly 7%.
So with that in mind, let’s navigate our way through all the doom and gloom…
The financial world certainly is full of uncertainty today…
The benchmark S&P 500 Index is still down roughly 18% on the year. And even though another bear market rally is in full swing right now, the outlook moving forward is still dark.
It’s not just elevated inflation or the stock market, either…
Interest rates are going up. And our nation has the largest debt level in world history.
The war in Ukraine rages on. Folks are suffering from increased energy and food bills. And geopolitical tensions between the U.S. and China or North Korea could boil over at any time.
The picture looks bleak. But importantly… that’s the doomscrolling version of the news.
Remember, we’re active investors. We may not have control over the global economy or the minds of world leaders. But we do have control over our investment decisions.
We can see the issues at hand and navigate around them.
For example, last December, I alerted PowerFeed readers to pending trouble in bonds…
In short, the Federal Reserve planned to shift gears to fight rising inflation. And as part of that process, I believed the central bank would likely start increasing interest rates.
Since rates and bond prices are inverses, that meant bond prices had to fall. That’s bad news for bondholders, of course. So as I wrote on December 23, 2021…
Folks, the Fed is making it clear… Bondholders can pound sand today.
So for now, your best bet is to step aside from bonds while the Fed does its dirty work to tackle inflation.
Meanwhile, bonds also typically act as a “safe haven” when stocks fall. So in volatile times, money usually flows out of stocks and into bonds.
But that didn’t happen this time…
In short, government-fueled stimulus from the COVID-19 lockdowns caused the inflationary environment. So when that “fake” money went away, stocks and bonds both suffered.
And yet, many investors missed that completely. Most folks hadn’t seen both stocks and bonds fall together before. So they were unwilling to accept that reality.
Ignoring the risks was a painful lesson…
We already mentioned the S&P 500’s struggles. And folks who stayed in bonds have suffered this year as well. The iShares 20+ Year Treasury Bond Fund (TLT) has fallen as much as 38% in 2022.
Fortunately, today’s market isn’t only about pain…
Despite what the doom-filled headlines might lead you to believe, many investment opportunities are paying off. And with the Power Gauge’s help, they’re easy to spot…
Put simply, our industry ranking shows us “where” to look. Then, we can focus in on “what” specific opportunities to buy. And the technical indicators we use tell us “when” to act.
In other words, these top industry groups are where the institutions are fishing for profits.
In this publication alone, we pointed to the Energy Select Sector SPDR Fund (XLE) on December 10, 2021. The Power Gauge then gave the sector a “bullish” rating in January.
And XLE is now up roughly 63% this year.
Folks, the Power Gauge doesn’t read the headlines. It doesn’t care if the media thinks the world is worse off than it was last year. It just looks for strong stocks in strong industries.
Remember, we invest in a market of thousands of stocks – not just a singular stock market. And by using the Power Gauge and following our process, we can thrive in any condition.
Whatever system you use, don’t doomscroll. And don’t use it as an excuse not to invest.
Good investing,
Pete Carmasino
