This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Buy Energy, Commodities, Money Managers Say

BOSTON ( TheStreet) -- Middle East turmoil has pushed up oil prices to more than $100 a barrel, making accelerating inflation the greatest threat to the fragile U.S. economic recovery since Europe's debt woes.

Still, professional investors including Robert Pavlik, chief market strategist at Banyan Partners, and Paul Nolte, director of investments at Dearborn Partners, say the economy is resilient enough to withstand higher commodities prices. Improvements in retail sales, the manufacturing industry and the job market have prompted the Federal Reserve to say this week that the economy "continued to expand at a modest to moderate pace."

Investors have been jolted by populist uprisings in the Middle East and North Africa, which have threatened to disrupt oil supplies, causing a spike in prices. Nouriel Roubini, the economist who correctly forecast the financial meltdown almost three years ago, said this week that an escalation of unrest may push prices to as high as $150 a barrel. The benchmark S&P 500 Index of the largest U.S. companies tumbled 1.6% Tuesday as fears rippled through the markets.

Violent protests that led to the ouster of Hosni Mubarak in Egypt have also unsettled Libya, where anti-government protesters are rebelling against Moammar Gadhafi's regime. Those uprisings have sparked similar protests in other Middle Eastern and North African countries, including Bahrain, Saudi Arabia, Yemen, Tunisia, Cote D'Ivoire and even Iran.

Fear and uncertainty over the Mideast crisis has resulted in a so-called flight to quality, with gold prices rising to all-time highs after declines earlier in the year.

Since the Egyptian protests began Jan. 25, the S&P 500 has climbed 1.4%, but after oil prices spiked from $86 a barrel to nearly $100 on Feb. 18, the broad stock-market index has slumped 2.5%. As March 6 marks the two-year anniversary of the market bottom, investors now question whether the bull-market rally that has produced returns of almost 80% is finally over.

Since Feb. 18, recent high-fliers such as Netflix (NFLX), First Solar (FSLR) and AIG (AIG) have been among the worst-performing members of the S&P 500. On the other hand, energy firms like Chesapeake Energy (CHK), Cabot Oil & Gas (COG) and Consol Energy (CNX) have been the biggest winners.

But those rocket stocks aren't the only ones getting punished. Economic barometers such as FedEx (FDX), Amazon.com (AMZN), U.S. Steel (X) and Ford (F) are each down 7% or more since Feb. 18. The consumer-discretionary sector has also been pummeled, with the Retail HOLDRs ETF (RTH) dropping 3.5% over that time.

Kevin Mahn, managing director and chief investment officer with Parsippany, N.J.-based Hennion & Walsh, notes that this is around the time when most portfolio managers and advisors reset their asset-allocation strategy for the new year. He advises clients to keep a steady hand.

"They should build a long-term allocation strategy and stick to it outside of any significant macroeconomic events," Mahn says. "There are opportunities for good risk-adjusted growth if you look beyond your traditional U.S. large-cap asset class."

Mahn says his firm, which has $300 million in assets under management or supervision, has pared fixed-income holdings in lieu of commodities. There is also a greater emphasis on value rather than growth, he says. "So many U.S. corporations are sitting on piles of cash and will most likely be buying back stock, buying companies or increasing their own dividends."

1 of 6

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
BAC $15.76 -1.80%
BG $81.70 0.48%
C $52.76 0.67%
CAT $83.33 -0.56%
EMR $58.11 0.29%

Markets

DOW 18,193.60 -20.82 -0.11%
S&P 500 2,111.53 +0.79 0.04%
NASDAQ 4,982.6690 -5.2210 -0.10%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs