“The committee remains steadfast in its often stated commitment to support the economy, as long as it is needed to achieve a full recovery,” Federal Reserve Chairman Jerome Powell said during yesterday’s speech at the annual Jackson Hole conference.
Although so-called “tapering” – phasing out of support purchases – may begin this year, the central bank governor pointed out that he is in no hurry to raise interest rates.
“Before it becomes relevant, the economy must have reached a level” consistent with maximum employment, and inflation must have reached 2 percent, and be on the trail of and barely surpass it for some time, “Powell said.
Fury
Now that the Federal Reserve is planning to reduce its support purchases, the question is which shares investors should invest in. CNBC has highlighted a bunch of stocks that did well during the previous quantitative easing in 2013-2014.
There is little historical basis to take off, and the first time support purchases were used was after the Great Recession in 2013, which came after the financial crisis in 2008.
– The downsizing from this period is useful, but not a perfect comparison, says Ed Clissold in Ned Davis Research in a note.
Last time, the markets resulted in a so-called “losing tantrum” – a downsizing rage attack directly translated. Investors panicked and sold bonds and interest rates soared.
Now the Fed is hoping to release another rage among investors, and this can be seen in the cautious way Powell now puts it.
Favorite stocks
The criteria for stock picking is that the company must have had an upturn of at least 30 percent during the downsizing in 2014. Of these, at least 60 percent of analysts must recommend buying and the upside potential must be at least 10 percent higher than the current price.
Here are the analysts’ favorites:
Shares from cyclical sectors such as industry and energy are well represented on the list. Southwest, Union Pacific and Diamondback Energy is mentioned, and the former shot up as much as 82.6 percent during the Fed’s previous tightening round.
Alaska Air is the most liked stock on the list – as many as 93.8 percent of Wall Street analysts recommend buying the stock. The aircraft share went 45.5 percent in the 2014 period, and now has an upside potential of close to 40 percent.
Rising interest rates are not positive for growth stocks and technology names, yet Big Tech is also represented. Facebook and Apple increased by around 37 percent last round.
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