Stocks to buy that will still pay off in an uncertain economy

The days of easy money are over, at least for now.

For much of the past decade, investors have been able to pour money into the market and almost always see their balances increase. And after two short months of recession in 2020, stocks have resumed their uptrend, hitting record highs, until recently.

With the highest inflation rate in 40 years, interest rates rising, stock market indices plunging into double digits and economic uncertainty, it is becoming increasingly difficult to find a place to invest in stocks. and get a decent return.

But financial advisers say it’s still possible. The first tip: when the economy changes, investors must change with it.

“We encourage investors to embrace the realities of this new environment,” said John Lynch, chief investment officer at Comerica Wealth Management.

With that mindset in place, here are tips to help you find the best stocks to invest in now.

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What stock should I buy in 2022?

Without low interest rates and low inflation to fuel growth and tech stocks, investors should start turning to value stocks, experts say.

Value stocks tend to be overlooked by investors during bull markets for high-flying growth and tech stocks, making them undervalued relative to their balance sheets, earnings growth and cash flows. Treasury.

But now that these high-flyers are in the dumps, investors should re-examine value stocks, experts said. During tumultuous times, they tend to be stable investments with long-term growth potential, as companies are usually mature with reliable earnings and sales growth and may even pay dividends.

Dividend power

When the market is upside down and capital gains are hard to come by, financial advisers advise considering dividend-paying stocks. Not only do they tend to be less volatile than non-dividend paying stocks, but they can also provide you with stable income in times of uncertainty.

Or if you reinvest the dividends, you will benefit from the power of compounding. Using your dividends to buy more stocks that pay more dividends will increase your money exponentially.

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If you hold the stock long enough, the dividends of most companies whose stocks are traded on major US stock exchanges are also often tax-efficient. In some cases, qualified dividends will be exempt from tax, but they will still be taxed at a lower rate than ordinary income.

Dividends can also be used to hedge against inflation, especially if they increase steadily.

“It’s important to note that we are targeting stocks with dividend increases at or above the rate of inflation,” said Daniel Milan, managing partner of Cornerstone Financial Service. “If your income is growing at around or above inflation, that’s a solid recipe for success.”

Devon Energy, which has consistently increased its dividend to $1.27 per share this month from $0.34 in June 2021, is a favorite along with Blackstone which increased its dividend to $1.32 in April from 0, $82 the same month last year. Hershey also raised its dividend to $0.901 in May from $0.804 a year earlier.

Buy what consumers need, not what they want

Another tip is to watch what consumers are buying and follow their lead, experts say. During tough economic times, consumers shift their spending towards daily necessities and away from non-essentials.

“Health care and basic consumer goods, things people need to buy like food and household supplies, things you would buy regardless of the economic environment,” said Mychal Campos, investment manager at the financial services company Betterment. “These sectors hold up in recessionary environments.”

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Other recession-proof investments include commodities and energy, which include companies like Chevron and Exxon, Campos said. Utilities are also another option that falls into this category, but also pays dividends, he noted.

Another that might surprise you is Altria, Milan said. Altria manufactures and sells tobacco products and is classified as a consumer staple company.

“It’s resistant to inflationary and recessionary pressures, I guess, because you can sell more bad stuff when people are stressed,” Milan said.

Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at [email protected] and sign up for our free Daily Money newsletter for personal finance tips and business news Monday through Friday mornings.

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