Looking for Defensive StocksLast Tuesday (April 13), the Dow Jones Industrial Average dropped 134 points and the Nasdaq Composite fell 35. Investors were running for cover on fears that inflation and interest rate increases were just around the corner. Still, 113 stocks managed to hit new highs for the day. The list is dominated by defensive stocks in the energy, natural resources and food sectors. I'll draw from these to make up the inflation-fears end of my barbell.
Smart Growth StocksNow on to the other half of the barbell, the growth end. Here the market's recent action won't give us much help. Growth stocks have been out of favor ever since investors started focusing on inflation and interest rates. That out-of-favor status makes this a good time to buy shares in this group, but it also makes it harder to find them.
- Stocks that will deliver solid earnings growth as long as the economy is growing at even a modest rate, and no matter what inflation and interest rates do.
- Stocks that also trade at relatively modest valuations compared to that growth rate.