Stock Market Drop Accelerated as Recession Seemed More Likely

Mr. Faber thinks investors benefit twice when they buy value stocks.

“Value is good because it’s cheap and because you’re avoiding something that’s stupid expensive,” he said. “Avoiding the really expensive stuff in the last year has really saved everyone’s bacon.”

Saira Malik, chief investment officer at Nuveen, a fund management company, prefers American stocks. In a presentation of the company’s investment outlook, she emphasized quality, as Mr. Faber did, highlighting characteristics like resilient balance sheets and an ability to increase dividends. But she favors growth stocks — stocks of companies whose earnings are less sensitive to economic ups and downs.

Among bonds, she and her colleagues favor municipal and high-yield issues and would limit exposure to long-term Treasuries.

Mr. Temple said he considered it counterproductive to try to choose between value and growth stocks. His advice is to go with either as long as you stick with quality, which he defines as “companies with high returns on capital that can be sustained.” Stocks in those companies usually do better when the economy weakens as investors seek safety. This year, though, quality has underperformed.

Companies that he likes and that have been marked down include Microsoft, Amazon and Google’s parent, Alphabet. All three stand to benefit from a continued move of business computing to the cloud. Mr. Temple also recommends the payment card networks Visa and American Express.

He acknowledged that these companies’ stocks, like the market broadly, may have further to fall. But he said he expected them to be solid buys over the long haul, even if holding them for the next few months may get uncomfortable.

“I’m not smart enough to pick the absolute low,” Mr. Temple said. “There are really good, quality companies that are on sale that you want to own for the next three to five years. We’re seeing more opportunities as this sell-off continues.”

Article source: https://www.nytimes.com/2022/07/15/business/stock-market-recession-half-year.html