Derek Horstmeyer

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43 appearances 1 recordings 1 series first heard Jun 2022 last heard Jun 2022

Derek Horstmeyer’s voice in public audio — every appearance, attributed to the second.

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WSJ Your Money Briefing · Which Stocks Perform Best Amid High Inflation? · 17 Jun 2022 podcast

So the companies that are producing these things tend to do well.

We really see that when inflation spikes, that most sectors have negative returns.

So included in this, we see healthcare, we see technology, even utilities falter during inflationary spikes.

And the reason why we see healthcare on that list is, again, going back to the cost of borrowing.

A lot of healthcare, and in particular pharmaceutical companies, have to borrow a lot of money.

So when interest rates go up, this really affects their bottom line and causes their stock price to fall.

Again,

You would think that safe things like consumer staples or utilities would do well in times of market panics or market inflation like this.

But you've got to remember that what is driving this inflation is a lot of commodity prices going up.

So if commodity prices are going up, these consumer staple companies have lower margins because they have very price sensitive consumers.

So, consumer staple companies, during inflationary spikes, their profit margins go down, and therefore their stock price tends to go down.

What we see is that markets tend to plummet or fall about 20% to 30% leading up to a recession.

I think right now, most market participants are pricing in a recession, maybe around the beginning of 2023.

And we've already fallen about 20 to 25 percent.

So I don't think based on historical data, I don't think we're going to fall too much further if past experiences informs what we're having right now.

So I would tell most investors out there not to hit the sell button because the market's already factored in a lot of what this bad inflation data is showing us.

And further, the number one killer of retail investors or regular investors' long-run returns is trying to time the market.

It's one thing that's just kind of innate to every person.

You want to try and time the market.

Data shows that on average, a retail investor will lose about 2% of their portfolio every year in returns trying to time the market.

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