Value Gets Its Moment. Consider These Stocks and ETFs.

Buy the dip, wrote J.P. Morgan’s strategists early this past week. As calls to courage go, it wasn’t exactly Churchill during the Blitz.

The dip in this case was a 2% decline, year to date, in the

S&P 500,
bringing its 10-year gain to 261%, not counting dividends. Also, many of the biggest individual dippers this year have been thinly profitable highfliers, like cloud player


(ticker: SNOW), or assets that are backed by suspended disbelief, like crypto.

But these are quibbles. I take J.P. Morgan’s broader point, which is that an expected rise in interest rates needn’t derail stocks. Yes, the U.S. inflation rate just hit 7%, the highest since 1982, back when E.T. was phoning home and the rich kid on my street got a Commodore 64 computer—his old man worked for IBM. And yes, there’s growing agreement that some of that added inflation will stick, and action is needed.

“The problem is, as that inflationary mind-set gets embedded in prices and wages, the Fed has to respond with kind of hitting the economy over the head with a brick,” says Edmund Bellord, a portfolio manager at Harding Loevner.

But the starting point for rates is so sharply negative after adjusting for inflation, he says, that raising rates might not be so bad for stocks.

J.P. Morgan compares now with late 2018, when rate increases sparked a stock selloff, and the Fed later reversed course. Back then, the starting point for real rates was positive, and the economy was weakening.

This year, the bank predicts, will be characterized by the end of the pandemic and a full global recovery. That hinges on its expectation that “Omicron’s lower severity and high transmissibility crowds out more severe variants and leads to broad natural immunity.” I, for one, can’t wait to get back out there this year and decline to travel because of runaway pricing, rather than fear of infection.

Rather than buy the bob, or waffle, or whatever the market term is for a not-quite dip,…


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