Welcome to 10 Things Before the Opening Bell.
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1. The impact of a hawkish Fed has experts divided. As the central bank prepares for its first of several interest rate hikes of 2022 next month, a common piece of advice peddled to investors has been, “brace for volatility .”
Among those voicing concern is famed economist Mohamed El-Erian. He has warned the Fed’s rate hikes could hammer the economy and drive volatility in the stock market. In his eyes, the policy shift is too abrupt after the central bank spent valuable time dragging its feet on combating inflation.
“I question whether the economy can take seven rate hikes with quantitative tightening on top of that,” El-Erian said. “I’m worried as to whether it’s going to absorb it.”
BlackRock holds a different outlook, though. The $10 trillion asset manager said the market is overreacting, and that the Fed will raise interest rates less sharply than investors expect — the real outcome is likely to be more dovish.
Investors can prepare for policy updates by building around the financials, energy, and “quality parts of the technology sector,” as well as margin-resilient sectors, according to a BlackRock iShares strategist.
“We favor quality, innovative tech companies with stable cashflows and higher profit margins,” wrote Gargi Chaudhuri, head of iShares Investment Strategy.
2. US stock futures are heading higher. Investors are preparing for Thursday’s inflation print and taking some heart from easing tensions between Russia and Ukraine. Take a look at what’s happening today.
3. Bank of America listed the top investing themes its team is targeting. The firm’s analysts, strategists, and economists compiled their insights into what will happen next in markets and the global economy. See their list of 10 themes — and how you can profit from each of them.
4. Earnings on deck: The Walt Disney Company, CVS Health Corp, and Fox Corp, all reporting.
5. Alphabet’s 20-for-1 stock split may entice other companies to do the same, per Bank of America. The move could allow fresh inflows into the stock market this year. The bank found stock splits are historically bullish for the companies that enact them.
6. Crypto donations to groups backing Ukraine are soaring as the threat of war with Russia looms. A cryptocurrency analytics firm has reported massive donations in recent months — including $200,000 worth of bitcoin for Come Back Alive, a Ukrainian army support group.
7. Peloton soared after CEO John Foley announced he was stepping down. The company said it would cut 2,800 jobs, and slashed its full-year revenue guidance. The activist investment firm that had pushed for Foley’s exit thinks Berkshire Hathaway and Adidas check every box as a potential buyer of the company.
8. Wells Fargo said it isn’t too late to invest in crypto. Adoption could only now be nearing a “hyper-inflection point,” the bank said. It explained why investors shouldn’t feel like they missed out on the crypto boom.
9. A stock-picking expert broke down how to tap into the metaverse as the nascent sector surges. As virtual worlds boom in popularity, some are still questioning the narrative around investing in the trend. These three companies that aren’t Meta can make a good entry point for investors looking to get skin in the game.
10. Bank of America is predicting a stunning 11 rate hikes this year and next. But the firm said stocks will weather them just fine — here’s what it recommends investors should buy to thrive in the new environment.
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Compiled by Phil Rosen. Feedback? Email [email protected] or tweet @philrosenn.
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