Markets bottomed in June 2022 and staged an incredible rally. This rally ended just before summer’s
end. Last month, S&P 500 gave up the entire summer rally.
The Federal Reserve repeated its tough stance against inflation. Fed Chair Jerome Powell reasserted his
rate hike policy. He will keep raising rates until inflation rates start falling. Even after that, rates could
still rise. The central bank requires real interest rates to match that of core inflation. This will keep debt
management costs high. Higher borrowing will hurt the housing market and highly indebted firms.
Investors can beat the Fed’s rate hikes by getting out of its way. In housing, avoid Zillow Group (Z). Real
estate services Redfin (RDFN) could test new lows, as well as Opendoor Technologies (OPEN).
Companies with high debt will suffer. AT&T (T) spun off its streaming and content business through
Warner Bros Discover (WBD). This was not enough to allay investor fears. T stock traded at close to 52-
week lows recently. Similarly, Verizon (VZ) closed at a fresh low on Sept. 2, 2022. Investors decided the
rich dividend did not compensate for the high debt levels those telecom firms hold.
Investors may seek companies with rich cash flow growth. Look elsewhere by considering energy firms
instead.
