Despite a worldwide pandemic, 2020 and 2021 saw double-digit returns for the major stock market indices. These indices were largely propelled by a handful of large companies. Facebook, Apple, Amazon, Netflix, Google, and Microsoft contributed much to the upward movement of the major indices. The Federal Reserve has been very accommodating in propping up the economy thus helping the United States get through these hard times. The Fed has indicated that they will begin to back off their policies of aiding our economy. Other interesting developments include rising inflation and interest rates. Also, the current administration, may not be as pro-business as in the past. They seem to be focusing on more social issues that they feel need attention.
At the moment, stocks in the Utility, Financial , Basic Materials and Consumer Non Cyclical sectors are showing the most upside momentum. These industry groups often fare well in a rising rate environment. Health Care and Telecom stocks are lagging. Another very compelling sub-sector is the Semi-Conductor group. Semi Conductor chips are present in many tpes of equipment world wide. Most all types of electronics use some type of chip these days. The chip shortage has had a major impact on the automobile industry. There are several well known chip companies such as Intel, AMD, and Taiwan Semiconductor. In addition, there are many smaller chip related companies that manufacture parts for these larger companies. Many produce their own smaller, highly specialized chips.
Many investors like the idea of holding names like Apple, Netflix, etc in their portfolios. Sometimes it can pay off in a big way to dig a bit deeper and explore some smaller, high quality companies that are not on everyone’s radar.
