The S&P 500 Stocks are down more than 10% now through the end of April. Everyone is wondering what is going to happen next and what is the best investing strategy for the rest of the year.
In this article we are going to cover :
What Are The Key Factors Driving The Market Right Now?
What Are The Best Stocks For This Market?
What Are The Best Stock Sectors For This Market?
What Do We Think Is Going To Happen The Rest Of This Year In The Stock Market?
What Are The Top 3 Best Investing Strategies For 2022?
What Are The Key Factors Driving The Market Right Now?
The S&P 500 is down more than 10% so far this year. Some key factors driving the current market volatility include the Russia invasion of Ukraine, supply chain issues, rising trade tensions with China, and rising interest rates that are being implemented to slow inflation.
The growth stocks have been hit hard as the market has rotated into more defensive stocks.
What Do We Think Is Going To Happen The Rest Of This Year In The Stock Market?
Due to the factors we covered which are driving the market right now, it is difficult to say exactly what is going to happen the rest of this year. However, we will likely see continued volatility in the market as investors adjust their portfolios and position themselves for the future.
We know that interest rates will continue to rise as the Chicago Federal Reserve Bank President Charles Evans said the Fed could raise its policy target range to 2.25%-2.5% by year-end and then take stock of the state of the economy, but if inflation remains high will likely need to hike rates further.
What Are The Best Stocks For This Market?
The best stocks for this market are going to be the companies that can weather the storm and still maintain or grow their earnings. The current market conditions are favoring dividend stocks that make money and have a history of positive earnings growth.
Companies like Johnson & Johnson (JNJ), Coca-Cola (KO), and Procter & Gamble (PG) are all dividend stocks that have performed well in down markets.
What Are The Best Stock Sectors For This Market?
The best stock sectors for this type of market are defensive sectors like consumer staples, healthcare, and utilities. These sectors tend to outperform the broader market in a rising interest rate market. So I like to be more heavily weighted in these sectors.
We want to stay diversified as well. So we don’t want to have all of our stocks only in consumer staples or healthcare. We should have Financial, Healthcare, Consumer Staples, a Utility and even some Technology. I also believe that people should have some gold and/or Bitcoin as I am a big believer that Cryptocurrencies are here to stay.
What Are The Best Strategies To Capitalize On the Current Situation In The Market?
Dollar-Cost Averaging
Dollar-cost averaging involves making periodic investments in a stock or mutual fund, regardless of market conditions. This allows investors to take advantage of buying opportunities when prices are low, and helps protect against sudden drops in stock prices.
When the stock market has been hit hard many inexperienced investors sell and get out of the market. This is exactly the wrong time to do this. When the market is at a low this is the time that you should be buying.
So dollar-cost averaging takes the emotion out of the decision to sell and you actually buy during the low periods.
Long the Dividend Stocks
The current market conditions are favoring dividend stocks that make money and have a history of positive earnings growth. Companies like Johnson & Johnson (JNJ), Coca-Cola (KO), and Procter & Gamble (PG) are all dividend stocks that have performed well in down markets.
The large institutional investors have been moving out of tech and into these dividend stocks. The more money that comes into these stocks forces the stocks to increase in price. Simple supply and demand dynamics are driving this trend, and it is likely to continue for the near foreseeable future as long as interest rates are still rising.
These high-quality companies can often weather market volatility and still maintain strong earnings growth.
Neutral Options Strategies Including Strangles and Iron Condors
With the increased market volatility, we are seeing a lot of opportunities to profit from neutral options strategies. These include strangles and iron condors.
A strangle is an options strategy that involves buying both a put and a call option on the same underlying asset with different strike prices and the same expiration dates. The investor hopes that the stock will remain within a range and make a profit.
An Iron Condor is also a neutral option strategy that involves selling both a put vertical spread and a call vertical spread in the same underlying asset with the same expiration date. The investor hopes that the stock will trade within a certain range so that they can make a profit from the premiums collected.
I have videos covering both of these option strategies which I’ll link to below.
Since tech stocks have been hit hard so they are low and many still have pretty high IVR which is implied volatility rank. High IVR means that the options will pay high premiums. So you can collect more premium and go wider with your strikes which allows for a larger range that the stock needs to stay within to be profitable.
If we think that some of these tech stocks with high IV will remain low and stay in a range as long as interest rates are rising. Then Strangles and Iron Condors will be good strategies.
Conclusion
The best investing strategy for the rest of this year will be to stay focused on your long-term goals and keep a close eye on your investments. You should also take advantage of any dips in the market to buy more stocks that fit your investing strategy, as these opportunities may not last for long. Stay diversified with a little heavier weight in the profitable companies that pay dividends.
Whatever strategy you choose to implement, it is important to stay calm, level-headed, and focused on your long-term goals. This is not the time to panic and sell all of your stocks, as this will likely only lead to losses in the long run.
Always do your research and consider your investment goals before you begin trading stock options. For more stock and financial information, please check out our other resources at OptionsFinanceProfits.com.
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