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?

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
Editor, Rich Retirement Letter
RichRetirementFeedback@StPaulResearch.com