Bear Market 2022: Is There Anything Left to Invest In?


  • In order to evade damage inflected by a bear market, investors can use a few unique strategies.
  • Consumer staple stocks can fight economic cyclicality.
  • Quality factor investing provides good odds in any market environment.
  • Investors should also consider chasing high-dividend yield stocks to combat inflation.
bear market on stock exchange

Source: bacho /

Don’t overwhelm yourself with news coverage of sell-side Wall Street analysts who are “panicking” about the market; they’re probably trying to sell you put options. In fact, there are a variety of ways to beat a bear market.

First, you need to ensure that you’re aligned with a suitable asset class. After all, the financial markets, just like the economy, encompass a cyclical environment. From there, you need to ensure that you’ve discovered the correct sectors to invest in because intra-asset-class correlations can differ at various stages of the economy. Lastly, ensure that you’re well-diversified with stocks that have proven track records.

With all of that in mind, here’s how you should approach investing in the 2022 bear market.

Consumer Staples Help Investors Deal With Bear Markets

Consumer staples refer to goods we need for everyday living instead of products that we buy with “spare money.” As such, the staples sector is often considered non-cyclical. 

In a recent note, Chris Carey of Wells Fargo explained consumer staple investing parsimoniously. According to Carey, in this current market, investors could opt to allocate capital to consumer staples as the sector could outperform others for the foreseeable future because of the sector’s ability to counter economic headwinds. I agree with Carey; if you look at the staples sector, it typically contains low-beta stocks with wide profit margins, both of which are attractive during risk-aversion periods.

So, which stocks in this space are hot? Goldman Sachs recently suggested that investors include the following consumer staple stocks in their portfolios: Walmart (NYSE:WMT), Mondelez (NASDAQ:MDLZ) and Procter & Gamble (NYSE:PG). 

Focus on Quality Stocks

Quality investing is a term that derives from asset pricing theory, especially pertaining to factor pricing models. Factor pricing models are statistical measures of how specific categories of stocks perform in relation to the economic environment.

According to much of the latest financial literature, stocks that fit into the quality factor category exhibit solid returns in most economic environments, as they possess extreme power along with low volatility. The quality factor is characterized by above-normal return metrics, solid balance sheet health, market dominance and high operating leverage. 

If we take a look at the top holdings in the USA Quality Factor Ishares Edge MSCI ETF (BATS:QUAL), we can identify several stocks that fit the bill. For example, in-tune with QUAL, we might assume that Nvidia (NASDAQ:NVDA), Apple (NASDAQ:AAPL) and Johnson & Johnson (NYSE:JNJ) could all perform well in the current market climate.

High-Dividend Yield Stocks Are Strong Choices

Investors often opt for high-dividend stocks whenever inflation bites. I’m assuming that the reason for this is binary. First, more money floods into stocks with high income yields to combat rising inflation. Second, risk-aversion causes investors to opt for a more sure return in dividend stocks instead of “could be” growth stocks. Regardless of the rationale, it’s clear for all to see that high-dividend yield stocks have outperformed the market during the past year.

I had a look at what Vanguard is doing with its “high-dividend” portfolio. Vanguard’s High Dividend Yield Vanguard ETF (NYSEARCA:VYM) is currently allocated in stocks such as Exxon Mobil (NYSE:XOM), JPMorgan Chase (NYSE:JPM) and Pfizer (NYSE:PFE). I’m also confident in these stocks’ prospects, as I believe they’re proven assets with robust fundamentals.

On the date of publication, Steve Booyens held a long position in QUAL and VYM. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Steve co-founded Pearl Gray Equity and Research in 2020 and has been responsible for institutional equity research and PR ever since. Before founding the firm, Steve spent time working in various finance roles in London and South Africa. He holds an MSc in Investment Banking from Queen Mary – University of London and is working towards his Ph.D. in Finance, in which he’s attempting to challenge the renowned Fama-French 5-factor pricing model by incorporating ESG factors. His articles are published on various reputable web pages such as Seeking Alpha, TipRanks, Yahoo Finance, and Benzinga. Steve’s articles on InvestorPlace form an interesting juxtaposition between mainstream opinion and objective theory. Readers can expect coverage on frequently traded stocks, cryptocurrencies, crowdfunding, and ETFs.

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