Microsoft (NASDAQ:MSFT) has been a bellwether of the 2022 bear market.

The stock is down 26% so far in 2022. It has come down in lockstep with the Nasdaq average, which recently was down about 32%.

Microsoft management has been warning investors of trouble, lowering its earnings forecast. Revenue guidance was cut $500 million this month, as was its earnings estimate. Still, analysts expect $2.30/share of earnings on $52.9 billion of revenue when it next reports July 26.  The company has even become more cautious in hiring, at least in its flagship Windows and Office groups.

But if that’s all there is to Microsoft’s recession, let’s keep on dancing. Let’s break out the booze and have a ball.

MSFT Stock: Cloud Power for Less

Microsoft’s June 21 opening price of $251/share represented a market cap of $1.85 trillion, a little over nine times revenue and 26 times last year’s earnings. The 62 cents/share dividend now yields 1%.

In today’s market that’s still pricey. But for MSFT stock it’s dirt cheap. Since Satya Nadella became CEO in early 2014 and committed the company’s future to its Azure cloud, its value is up 524%. That’s even with 2022’s losses from a December high of $336/share. That dividend has also doubled.

Microsoft is powered by its cloud, which continues to slowly gain market share even against mighty Amazon (NASDAQ:AMZN). The best evidence of a coming recession was a slight fall in cloud spending in April.  In Microsoft’s case customers spent 2% less than in January. But it still has 21% of the cloud infrastructure market, and Azure also powers the rest of its business.

Under Nadella, Microsoft is known for business software rather than consumer franchises. But it still has the leading position in gaming, and its advertising business is growing at 30%/year. The pending acquisition of Activision Blizzard (NASDAQ:ATVI), for $68.7 billion in cash, will make Microsoft Gaming as big as its Windows business. This matters because gaming has represented the leading edge of client computing for over a decade.

The Way Out

Technology often leads the way into recessions, but it also leads the way out.

Analysts now expect business to be restructured around the cloud, which should benefit Microsoft even more than its rivals. Credit Suisse expects cloud spending to exceed on premise computing by 2024. Current estimates that Azure will take in $10.5 billion this year look conservative. Note that the hiring caution at Microsoft is only on the client side of the business, not Azure.

This makes Microsoft a key piece of the West’s infrastructure, under constant threat from other countries. Microsoft is buying Miburo, a cyber-threat research outfit specializing in foreign intelligence, as it rises to meet the threat.

Microsoft capital spending has trended downward in fiscal 2022 but was still $20.4 billion for its first three quarters. Last year it spent $24.2 billion. Microsoft’s cloud footprint now includes 200 data centers in 34 countries, linked by 165,000 miles of cable.

The Bottom Line

Microsoft is the second-largest U.S. company by market cap, but its most important. No company better represents America’s dominance of the world economy. Few companies are as well-run.

When Microsoft hiccupped this year, the whole economy caught cold.

As Microsoft returns to health, I expect the U.S. economy to return to health. I wouldn’t expect big gains in MSFT stock from here, but your investment should be safe. If I’m wrong, the whole world will be collapsing.

At the bottom of a bear market, panic is a natural reaction. Microsoft is Paxil for your portfolio.

On the date of publication, Dana Blankenhorn held long positions in MSFT and AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.