Print the page
Increase font size
The Dog That Didn't Bark When Stocks Fell This Week

Posted January 06, 2022

Zach Scheidt

By Zach Scheidt

The Dog That Didn't Bark When Stocks Fell This Week

My kids are big Sherlock Holmes fans, which has made for some great conversations around the dinner table.

I love taking their enthusiasm from a mystery they're interested in and talking about how logic and problem-solving can help them in real-life situations as well!

Stick with me for a minute, because today I want to tie one of the most famous Sherlock Holmes stories to what's happening in the market.

And as you'll see, using some reasonable (but unconventional) logic can help you find the best stocks to invest in — despite the market's recent pullback.

A Sherlock Holmes Theme in Today's Market

The stock market took a beating yesterday as investors reacted to the minutes from the last Fed meeting.

According to the notes from the last meeting, several Fed members have become uncomfortable with the high levels of inflation (it's about time!) and would like to shift policy.

The minutes show that the Fed is planning to:

  • Reduce its bond-buying program more quickly.
  • Hike interest rates sooner.
  • Accelerate these hikes through the year (and into next year).
  • And allow bonds it currently holds to mature with fewer repurchases.

What does all of this mean?

The short answer is that interest rates are set to move higher in a big way. And that shift is already sending ripples — actually more like waves — through financial markets.

In particular, tech stocks got pummeled as big institutional investors moved money out of speculative areas of the market. Growth companies that only make small profits (or worse, generate losses) are very hard to justify when interest rates rise.

That's because these institutional investors have better options for making profits when interest rates are higher. And when these investors start selling certain companies, the stock prices can drop quickly!

But even with the tech-heavy Nasdaq Composite dropping sharply, one area of the tech market didn't follow the script. 

In fact, the area acted a lot like "the dog that didn't bark" in the famous Sherlock Holmes story.

Scoping Out The Stocks That Didn't Fall

In one of my favorite Sherlock Holmes stories, there's a robbery that takes place in the middle of the night.

Holmes figures out that the robber was known to the family because the dog didn't bark when the break-in occurred. I love the reasoning, paying attention to what didn't happen to figure out what did.

With that logic in mind, take a look at a chart of the semiconductor sector below. Can you pick out what didn't happen with this group of stocks?

chart

Semiconductor stocks are still trading very close to all-time highs, despite the carnage that has driven other tech stocks lower.

The strength in this area of the market is refreshing.

That's because semiconductors are an important indicator of how our economy is progressing. 

Since so much of our world is now tied to technology, strong demand for the computer chips this industry makes is a great sign that the overall economy is healthy.

And since semiconductor stocks didn't sell off sharply along with the rest of tech stocks, they're more likely to rally to new highs when the selloff is done.

Investors who bailed out of their speculative tech positions will want to find a new home for their investment cash. And the stocks included in the semiconductor industry are a great place to start.

If you want to profit from this strong theme, you can simply buy shares of the VanEck Semiconductor ETF (SMH)

The group should continue to do well, especially once the sellers run out of shares and buyers step back into the market.

Looking at specific names included in this fund is also a great idea. I'm doing my own research on several semiconductor stocks and looking for the best plays to help grow and protect your investments.

Here's to living a Rich Retirement,

Zach Scheidt

Zach Scheidt
Editor, Rich Retirement Letter
RichRetirementFeedback@StPaulResearch.com

I Don't Like Mutual Funds — And Neither Should You

I Don't Like Mutual Funds — And Neither Should You

Posted January 26, 2022

By Zach Scheidt

Here’s why mutual funds tend to be bad investments — and how you can generate even better returns yourself.
5 Reasons Bitcoin is About to Skyrocket

5 Reasons Bitcoin is About to Skyrocket

Posted January 25, 2022

By Guest Contributor

Why crypto will have an explosive 2022
[VIDEO] 5 Charts to Renew Your Faith in the Stock Market

[VIDEO] 5 Charts to Renew Your Faith in the Stock Market

Posted January 24, 2022

By Zach Scheidt

Here are five charts that explain where we are and how soon you can expect stocks to start trading higher.
3 "Buys" the Market Is Giving Us Today

3 "Buys" the Market Is Giving Us Today

Posted January 21, 2022

By Zach Scheidt

2022 is off to a very difficult start for most investors. But instead of letting the market's fear get under your skin, here are three quality plays you can buy today — despite what’s happening in the overall market
Make Microsoft's $26 Billion Secret Weapon Work for YOU!

Make Microsoft's $26 Billion Secret Weapon Work for YOU!

Posted January 20, 2022

By Zach Scheidt

Microsoft announced a blockbuster buyout earlier this week. Here’s how its secret buyout weapon can work even better when you put it to work in your investment account.
Why Bitcoin Is a Screaming BUY After Death Crosses

Why Bitcoin Is a Screaming BUY After Death Crosses

Posted January 19, 2022

By Zach Scheidt

By now, you've probably seen the terrifying headlines about bitcoin blowing up and going to zero now that we've seen the death cross. But here’s the shocking truth about the cryptocurrency…