Inflation has made roughly 41% of the individual U.S. investors more “cautious” about the stock market, but Corvex Capital’s Keith Meister says it’s “not bad for all stocks”.
Meister’s remarks on CNBC’s ‘Halftime Report’
On CNBC’s “Halftime Report”, Meister said inflation was bad only for a handful of stocks that lacked pricing power.
So, you want to own businesses that are high quality with strong balance sheets and have a product that can pass on price and have real nominal earnings growth in a world even if there’s inflation.
Meister agreed that over the next twelve months, there might be several “false positives” indicating that inflation won’t be transitory but reiterated that the U.S. economy at large was in good shape.
Investing in equities is a no-brainer for Meister
According to Meister, mega-cap technology names like Apple, Microsoft, Amazon, and Facebook continue to be a smarter pick than the 10-year bond at 1.67% yield because the tech giants are likely to grow earnings by up to 20% annually for the next five years.
So, do I want to buy these stocks and have positive returns or do I want to buy bonds at 1.67% return and have 4% to 5% inflation guarantee I’ll lose capital? It seems to me that the obvious trade is still to own equities.
Apple, Microsoft, Amazon, and Facebook together make up roughly 20% of the benchmark S&P 500 index that is now trading near its record high with a little under 25% growth year-to-date. The tech titans are set to report their quarterly financial results next week.
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