The macroeconomic headwinds of high inflation and aggressive interest rates over the past year have pressured quality stocks, causing them to trade at prices lower than their actual value.
However, with inflation continuing to retreat, as was evident during March’s 5% increase annually, fundamentally strong stocks Mondi plc (MONDY), Nu Skin Enterprises, Inc. (NUS), and Garrett Motion Inc. (GTX) could be promising buys considering their discounted valuations.
Before diving deeper into the fundamentals of these stocks, let’s discuss the factors likely to keep the stock market under pressure this year.
Although inflation shows signs of easing, thanks to the Federal Reserve’s tight monetary policy, it stays above its comfort level. The Fed has raised rates nine times since March last year, with the policy rate now in a range of 4.75% to 5%.
With high inflation and strong job growth, officials now project one more rate hike to between 5% and 5.25%, the highest since mid-2007.
The market fears this could tip the economy into a recession. Value stocks have historically performed well amid high-interest rates, outperforming growth stocks. Investors’ interest in value stocks is evident from the Vanguard Value ETF’s (VTV) 4.4% returns over the past month.
Given these factors, investors could benefit from…
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