Dave Gilbert here, Editor of Smart Money.

We humans are hardwired to pay close attention to potential dangers.

A hundred thousand years ago, it’s how we survived; constantly worrying that a tiger or bear might be around the corner was a valuable instinct.

We may not encounter ferocious wild animals in our day-to-day activities anymore, but our instincts remain a part of who we are. We are still deeply in tune with guarding ourselves from anything that could pose a threat… including a stock market that’s a bear.

One potential danger facing investors growled a little louder last week, and investors’ “fight or flight” instincts kicked in.

Most of us chose “flight,” as Federal Reserve Chairman Jerome Powell warned last Friday that he would do whatever it takes to get inflation under control.

He spoke of interest rates possibly remaining high for “some time.” And he said…

While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.

Powell’s speech triggered a new bout of recession fears, including the fear that our current mini-recession will become much worse than previously expected.

Amid the confusion and volatile market action, keep these two things in mind: Recessions are not as bad for stocks as you might think… and it still looks like an opportunistic time to get back to making money.

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You May Be Surprised to Learn This…

Just the hint of a recession is enough to scare the wits out of investors. The result is either panic selling, which pretty much never works out in the end, or paralyzing uncertainty.

Stocks can actually go up during recessions. In fact, they often do. The market looks forward, so stocks often turn higher before the economy improves. This data from Hartford Funds shows that stocks gained during seven of the 13 recessions since 1945.

The average for all 13 recessions was +3.7%. Of the seven recessions when stocks were up, the average gain was 16%. Of the six when stocks were down, the average loss was 10.7%. We’ve already seen a lot worse than that this year across all three major indexes.

So, recessions aren’t necessarily catastrophic for stocks. And as Eric Fry recently told his subscribers, indications so far point to a mild recession…

I would point out that our recessionary economy is not very recessionary. In fact, it may be the strongest weak economy ever.

It’s true that U.S. GDP has contracted slightly for two consecutive quarters, which means the economy officially entered a recession. But bear in mind that the GDP calculation is an “after-inflation” one. Before subtracting the effects of inflation, U.S. GDP actually soared 10.7% in the first quarter and 9.3% in the second quarter.

I’m not suggesting that the after-inflation (i.e., “real”) calculation is invalid or somehow fake; I’m merely pointing out that in terms of the dollars all of us actually earn and spend every day (i.e., nominal dollars), the economy is growing 9% to 10%. That’s an odd sort of recession.

Additionally…

• The U.S. unemployment rate is within a whisker of a 52-year low;
• Average hourly earnings have increased 5.2% year-over-year;
• Gross Domestic Income has advanced 11.9% year-over-year;
• And household net worth has soared 16.5% year-over-year.

Admittedly, these data points are all rear-looking, but they do not seem to indicate recessionary conditions. 

Focus on What We Do Know

We may not know yet how long the Fed will aggressively raise rates. We do know that the economy has slowed – and that has helped cool inflation at least a little bit.

We also know that consumers, while more cautious, haven’t shut their wallets entirely.

And here’s Eric again on what we do know…

All I know for certain is that stocks are much cheaper now than they were last fall. Although the major averages bounced nicely from their mid-June lows, they are still trading roughly 15% to 25% below their all-time highs, and many excellent stocks are down 50% or more.

I also know that major averages like the tech-heavy Nasdaq Composite rarely fall as much as they have recently. But when they do, they usually offer outstanding investment opportunities…

Officially, the bear market might hang around for a while longer, but many individual stocks have probably bottomed… and that is enough of a stock market bottom to start making serious money again.

Making money in the flat market isn’t easy, but it is definitely possible. Focusing on megatrends is the key.

Powerful megatrends rarely end quickly… and they can produce solid investment gains over the long term, even amid a recession, inflation, and potential dangers that cause many of us to flee, when in fact it may be the best time to embrace opportunity.

Power Trends for 2022… and Beyond?

Power trends, or “megatrends” as mentioned above, are the cornerstone of Eric’s investment philosophy… and they’ve proven time and again to stay strong and stay profitable no matter the market’s current sentiment.

Profitability isn’t a cut-and-dry definition; even the most massive megatrends are not immune to the market’s wiles. Nothing is.

But even when the sky was darkest, Eric recommended investments like Micron Technology, up 470%, Wheaton Precious Metals, up 525%, Freeport-McMoRan, which rose 1,506%.

Eric doesn’t focus on short-term investing fads that ebb and flow with every market cycle; rather, he focuses on the long-term. Trends that will last for the next six months, the next year, the next five years… and will likely transform how the world operates.

And right now, Eric’s zeroed-in on his latest megatrend, and it’s not exactly what you may think…

But hear him out, because…

• The profit potential is staggering; it has one of the best risk-reward profiles of any trade he’s seen in years.
• He’s made a lot of recommendations in exciting areas like battery metals, 5G, and artificial intelligence, but this sector is where he sees the biggest potential gains right now.
• And when stocks go down (as they have for the last eight months…), this sector tends to go up.

Go here now to get the rest of the details.

Regards,

Dave

P.S. If you watch this video on Eric’s latest megatrend now, you’ll get a company name and ticker symbol from Eric… totally for free.

On the date of publication, Eric Fry did not have (either directly or indirectly) any positions in the securities mentioned in this article.