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by DelaneyM 1516 days ago
"Recession" is a bit ambiguous. To identify winners and losers in any economic climate you need to consider the specific factors at play, and the winners of previous "recessions" may or may not be winners in the next.

In this case _my_ assessment is that we're facing a prolonged period of high inflation partially fueled by factors which can't be mitigated by Fed actions (COVID lockdowns in China, global transportation backlogs, European conflict, food shortages) and perpetuated by high household savings levels. I don't think we're going to face significant slowdown of consumer spending this year.

In that economic environment, consumer staples which do their own production and have the ability to quickly respond to inflation are favoured. I'm in a sector ETF for this.

I also believe profitable tech which is ad-funded is at an advantage - anything where prices are set by auction and ROI is demonstrable/visible is golden, as are industries like cloud computing which have natural deflationary economics. This implies Meta/Goog/MSFT (and in this I'm betting on specific tactics and am choosing specific companies).

Those are my bets, you should form your own hypothesis and extrapolate appropriately.

Also note that these are systemic factors, but will always be dominated by idiosyncratic realities. Individual stocks are only loosely correlated with sector movement, if you think you have a winner or asymmetric knowledge about a specific company don't let larger trends dissuade you (or vice versa).

Finally, a corollary to the above: when you invest on macro/sector trends, do so through sector/strategy ETFs. If you're investing on asymmetric knowledge or insight, invest in specific equities. Combine the two strategies at your peril.
1 comments
dharmatech 1516 days ago
> In that economic environment, consumer staples which do their own production and have the ability to quickly respond to inflation are favoured. I'm in a sector ETF for this.

What are some example ETFs in that space?

Commodities oriented ETFs?

---------- UPDATE ----------

OK, nevermind. :-) Googled "consumer staples etf" and a bunch of examples came up.

https://www.investopedia.com/top-performing-consumer-staples...

---------- UPDATE ----------

Top 10 holdings of IYK

Procter & Gamble PG 16.91%

Coca-Cola KO 11.10%

PepsiCo PEP 10.40%

Philip Morris PM 6.95%

CVS CVS 4.04%

Altria MO 3.60%

Mondelez MDLZ 3.40%

Colgate CL 3.00%

Archer Daniels Midland ADM 2.44%

Kimberly-Clark KMB 2.34%

----------

Consumer staples -> consumer poisons. This leads to upward pressure in healthcare.

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DelaneyM 1516 days ago
> Consumer staples -> consumer poisons.

When you're sampling the top-10 you get a biased set - "sin" stocks usually face increased consolidation pressure (certainly true for PM, MO, KO). If you expand your view to a full breakdown, a consumer staples ETF broadly represents "stuff people buy at supermarkets".

ETFs based on indices do not have opinions or intelligent design, they attempt to accurately represent a well-defined sector or thesis. A lot of people buy a lot of unhealthy stuff, so that shows up here.

If this is important to you, could I suggest screened indices (https://www.ishares.com/us/products/investment-goals#/funds?...) or a social impact fund (https://www.ishares.com/us/products/286007/)?

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