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Recession Proof Your Portfolio With Med-Tech

Posted November 17, 2022

Ray Blanco

By Ray Blanco

Recession Proof Your Portfolio With Med-Tech

Stocks dipped today with waning optimism around easing inflation and a Federal Reserve policy shift. 

While Wall Street parsed through a motley of corporate earnings folks are starting to talk about the “R” word again (recession).

While we did get a strong rally off the October lows, I suspect we won’t see stocks recover in a straight line for some time. 

At this point, I think it’s good to look at trend-breakers, especially when the market is as wobbly as it has been this week. 

By that, I mean what’s working? What’s not? What bounces are holding? And which are failing? 

Those are the critical questions on investors' minds heading into the weekend.

Today, we saw a bit of a dollar bounce while commodities and stocks took a hit.

Along with that, metals are taking a hit thanks to the dollar boost. 

Is this just a one-day reaction or something bigger? It’s important to be patient and watch for the reaction that follows.

Now, the next big-ticket item is the Fed Reserve meeting… 

I think it's December 13th next month. I think if they don't go another 75 full-blown basis points, maybe they go with a 50 basis points hike. 

Naturally, a more moderate hike could also be very positive for the markets. 

We could see a holiday rally to close out the year if the Fed sounds a little more dovish and doesn't act quite as strongly against inflation as it has for much of the year. 

That’s something that could really raise the markets by the end of the year… That said, I don't want to say it's all a bed of roses going forward. 

Pain Points to Look Out For

We're seeing a lot of signs of a weakening economy, in tech we're seeing huge layoffs, and I don't just mean at Twitter where Elon Musk is cutting staff left and right. 

Tech companies across the board are cutting back on their workforces and looking for any areas where they can save some cash… that's what happens in recessions. 

With the cutbacks, it’s possible that we could see a further weakening economy going into the end of the year with holiday spending expected to be down. 

We have a very, very strong potential for recession next year, which would no doubt have a negative impact on the market until it's fully priced in. 

Some of these record profits we've been seeing going back the last year or two, may not materialize, which will, of course, work its way into the stock market.

So what can we do about it as traders? 

Well, for starters, defensive stocks, stocks that do well in recessions because people have to spend the money anyway are good places to be. 

Healthcare and medical device companies fall into that list… 

You also have companies that pay out healthy dividends. 

Sometimes referred to as dividend aristocrats, these are companies that always pay a dividend and even raise dividend payments every year. 

Even though medical devices haven't done so well this year, the companies that purvey them are dependent on utilization. 

Utilization comes not just from consumer uses like at-home blood glucose testers, but in hospitals as well. 

There have been a lot of deferred procedures, specifically elective procedures, thanks to COVID, that I would expect to create a huge backlog that we could see materialize in some medical device companies' bottom lines. 

So, be on the lookout for some of these more defensive plays. Having a few of these names in your portfolio might be the difference between a red and green holiday season. 

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