My 3 biggest stock market predictions for January
MMost of the time, most investors should focus on the long term. That’s not to say, however, that long-term investors should just ignore all real-time developments. Big, long-term changes can happen in an instant. You must be ready and willing to respond, if warranted.
With that in mind, here’s a look at three major things looming in the pipeline in the near term that are likely to rock stocks more broadly.
1. Value begins to exceed growth
Shrewd students of the market can already see that while the past five years have been great for the broader market, they’ve only been great for – and because of – growth stocks. More specifically, since the start of 2017, growth stocks have exceeded S&P 500 (SNPINDEX: ^ GSPC) by gaining an incredible 173%, while value names only achieved a 58% gain over the five-year period.
As the old saying goes, nothing lasts forever. After years of delay, it’s time for value to shine.
In fact, we’ve already seen short glimmers of this leadership transition. Stimulated by rising interest rates in anticipation of continued inflationary pressures, the IShares S&P 500 Value ETF (NYSEMKT: IVE) is up sharply for the year so far, while the IShares S&P 500 Growth ETF (NYSEMKT: IVW) is decidedly down in the first days of 2022.
However, more of this divergence is likely to be in the cards as more investors accept that we are entering the final stages of a bull market marked by rising rates and inflation. . This environment tends to work against growth industries, but is somewhat of an advantage for value-driven sectors like commodities and banking.
2. A smaller bill Build Back Better is gaining ground
President Biden’s proposed $ 1.75 trillion Build Back Better Act was stalled late last year, just before the US Senate stepped down for the holidays because Republicans couldn’t. ultimately not bear the cost of the bill drafted by the Democrats.
The idea of a massive spending bill is not dead in the water, however. The bill will be much more palatable to conservative congressional hawks if it is smaller in scope. Meanwhile, most Democratic lawmakers are increasingly realizing that even a more modest Build Back Better bill is a much-needed legislative victory and better than no bill at all.
Image source: Getty Images.
This matters to investors primarily because the crux of any version of the Build Back Better Act will involve the actual construction of new infrastructure. This is great news for construction equipment companies like caterpillar, even if the ripple effect of this spending could prove to be positive for several sectors of the economy.
Keep in mind that outright passage of any lean Build Back Better bill is not likely to materialize in January; lawmakers simply won’t have time to update the proposed law and push it through the approval process. Wider support for the law should take shape within the month, however, which should be enough to restore investor confidence. This is likely to support stocks as a result.
3. Retailer return issues are reaching a boiling point
Finally, while this has been a growing challenge for years now – in step with the growth of e-commerce – retailers from Target at Macy’s instead of online purchase only Wayfair may finally reach their breaking point with merchandise returned to them for credit.
The numbers are simply staggering. U.S. consumers are expected to return at least a record $ 112 billion in holiday shopping in the month, before the return windows expire. That’s the B-Stock estimate anyway, which helps retailers liquidate the 90% of returns that can’t be put back on store shelves or sold as new online.
Another company called Optoro, which specializes in handling merchandise returns on behalf of retailers, says 2021 merchandise returns will cost those online and offline stores 59% more than in 2020. For the prospect, Optoro estimates that an average $ 50 item will cost $ 33 to return. The cost of return exceeds the maximum net profit made on the item when it is first sold in many cases.
It’s become such a costly nuisance, in fact, that even established retailers like Target and Amazon (NASDAQ: AMZN) simply tell their customers to keep their unwanted item even after receiving a refund. The little financial hit becomes less important than providing a hassle-free shopping experience in these cases.
Don’t look for sweeping revisions to return policies in January; it will take more time for retailers to think about their reverse logistics. Now (literally) running out of space to even temporarily store returned goods before being liquidated by the pallet, don’t be surprised to see the industry finally come to rough terms with the flaws of its generous return conditions. .
10 stocks we like better than Amazon
When our award-winning team of analysts have stock advice, it can pay off to listen. After all, the newsletter they’ve been running for over a decade, Motley Fool Equity Advisor, has tripled the market. *
They have just revealed what they believe to be the ten best stocks for investors to buy now… and Amazon was not one of them! That’s right – they think these 10 stocks are even better buys.
* Returns of the portfolio advisor as of December 16, 2021
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of the board of directors of The Motley Fool. James brumley has no position in any of the stocks mentioned. The Motley Fool owns and recommends Amazon. The Motley Fool recommends Wayfair and recommends the following options: January 2022 long calls at $ 1,920 on Amazon and January 2022 short calls at $ 1,940 on Amazon. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.