Armed Conflict, High Inflation and the Threat of Rising Interest Rates Present Opportunities for Investors

United States inflation is hitting a 40-year high as US inflation is up 7.9% year-over-year. While that is not good news as we are all paying more for almost everything we need to purchase daily, it does provide some unique opportunities for investors. Let’s look at a few sectors of the market that should be attractive for the foreseeable future.

The US economy is still strong as 678,000 jobs were added during the month of February. Americans are leaving their homes to spend money at restaurants, retail stores, and hotels despite inflation.

The unfortunate military conflict in Russia presents multiple opportunities for investors.

1. Fertilizer - Russia is the world’s largest exporter of nitrogen in the world which is used to manufacture agricultural fertilizer. Fertilizer prices have already risen significantly and may well continue to do so.

We have identified two large publicly traded companies that manufacture potash and nitrogen-based fertilizers as attractive Investments.

2. Oil and natural gas - The oil and natural gas sectors also look attractive given the fact that portions of the world are refusing to import oil and natural gas from Russia. High gasoline prices should increase the demand for all-electric autos and trucks.

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3. Defense - Spending on defense has already experienced a marked increase. Defense spending will increase significantly as most of the countries in Europe will use the conflict in the Ukraine as a reason to modernize missile and fighter jet systems to protect their country from invasion. Finland has already ordered 64 Lockheed Martin F-35 Fighters to replace their aging fleet of combat jets. Germany has chosen the F-35 as its future new Clear Strike Fighter. The number of F-35 to be purchased has not yet been disclosed by the German Ministry of Defense.

Germany’s chancellor, Olaf Scholz, has pledged to increase defense spending, up to the 2% target as outlined by NATO. We believe this presents a great opportunity for investors to increase their allocation in two companies involved in the defense industry.

4. Commodities - Commodities and consumer staples of many types have risen in price significantly and may continue to experience an increase in prices as we experience inflation for some time to come. Most industry analysts believe we will be living with higher inflation for at least two to three years. These conditions create opportunities for certain forms of commodities as well as food producers.

5. Rising interest rates - The Federal Reserve Board has announced increasing interest rates as a method of slowing down consumer spending in an attempt to reduce inflation. It is highly likely that as interest rates rise the banking industry will represent another opportunity for investors. The current low-interest rate environment leaves banks with a very small margin of profit from the difference in interest rates paid on deposits compared to the rates charged on new loans. Rising interest rates should lead to higher margins of profit for banks and financial institutions that lend money. Overall this rise in profits could make these financial institutions attractive to investors.

Please feel free to reach out to our office to arrange a no-obligation, no-cost consultation to see how you might reduce risk in your portfolio and take advantage of current market conditions. Please call 1-800-303-9255 extension 1 to arrange a time for an in-person or virtual meeting.

BROUGHT TO YOU BY: Wall Street Financial Group, INC http://www.wallstfinancialgroup.com

This story was originally printed in the April 2022 issue of The Prairie Land Buzz Magazine, a free publication distributed monthly to 11 IL counties. Find out more at http://www.thebuzzmonthly.com.

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