Market bearishness capitulated in late June 2022. Short-sellers who bet against the major indices fared
poorly. By mid-August, ahead of Jerome Powell’s comments at the annual Jackson Hole meeting,
markets erased much of their losses.
The rally ended when Powell warned of some pain ahead. Speculators wrongly guessed that the Fed
would magically stop raising interest rates. Despite the central bank is well behind the curve on inflation
fighting, speculators bet on cryptocurrencies, meme stocks, and technology stocks. Powell’s comments
bear significance on stock valuations from here.
Last Friday, Chairman Powell said the central bank would use its tools forcefully to attack inflation. It will
not loosen its interest rate policy for quite some time. Furthermore, inflation is not showing signs of
decline. The Dow lost 1000 points on August 26, 2022. 3M (MMM) led the drop with a 9.5% return.
Salesforce (CRM), which posted weak quarterly results, lost 5%. And Intel (INTC) lost 4.39%. Valuations
are highly favorable for nearly all Dow components.
Value investors may accumulate Walgreens Boots (WBA), Dow (DOW), American Express (AXP), Verizon
(VZ), and Travelers Companies (TRV). Growth investors would want Microsoft (MSFT), Visa (V), and
UnitedHealth Group (UNH).
Goldman Sachs (GS), Salesforce, and Boeing (BA) have the lowest quality scores (per StockRover data).
Consider avoiding those firms until they post strong quarterly results.
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