Josh Brown says go for these consumer-focused stocks that flourish with higher costs in the economy
There are a few places that investors can go for safety in today’s market environment, which has been marked by volatility caused by high inflation, geopolitical risk and rising interest rates. “I wish I could tell you … ‘We zoom back to highs, the market has gotten completely comfortable with a 5% Fed funds rate’ — I don’t think it has and I don’t think the economy is going to hold up that well,” in the first quarter of 2023, Josh Brown, co-founder and CEO of Ritholtz Wealth Management, said on CNBC’s “Halftime Report” Tuesday. “It’s just too high of a rate to assume that all of these great consumer businesses that make up the S & P can flourish,” he said. That means investors who know that this is the economic backdrop they’re working with should focus on sectors that fare well as costs rise, as well as corners of the market that offer things that consumers cannot forgo, he said. To that effect, Brown highlighted insurance companies as a potential bright spot. “Almost every name in this group – the 40 names in the S & P 500 insurance sector – are within 3% to 5% of record-high prices,” he said. “There’s nothing like this in the market right now,” he added. The iShares U.S. Insurance ETF is up more than 9% year to date, versus the S & P 500’s roughly 19% dip. “This is the type of area where you can find stocks that have charts that are going from the lower left to the upper right, they’re not expensive, good dividends and huge pricing power,” he said. Some of the top performers in the ETF include Allstate , which is up more than 7% in 2022. There’s also Chubb , which has gained more than 11%, and Progressive , which has jumped 25%. He also noted that catastrophic weather could give them the ability to get higher policy renewal rates and higher prices for those policies. “The market is responding that this is what you want to try to do this year, not worry abut an overall melt-up for the S & P,” he said.