After the worst first half of the year for stocks since 1970, the market was gifted a very, limited relief rally on Friday. What is the trajectory for the second half of 2022? If you own big tech, it is big down. So, please, don't tell me I didn't warn you. After calling the first-half meltdown, I am with a bit of self-satisfaction looking forward to another blowout in the second half of the year, with the exception of energy stocks.
Why? Because energy prices are higher. With energy prices at a WTI/Brent/Henry levels of $108/$111/$5.70 per barrel/barrel/Metric Million British Thermal Unit, it is going to be a long second semester of the year.
But stock analysts, like me, are trained to look for the second derivative, the movement in the curve. What could make the second half look different from the first half? Either massive demand destruction for hydrocarbons -- only a global recession could cause this -- or some kind of supply jolt. But we won't get that supply jolt, because the world is still mesmerized by this rigmarole about a "melting planet." Nonsense. All "ESG" nonsense.
So, for the second half of the year, I am predicting more of the same. Second verse ... same as the first. As I manage my client accounts, I am taking advantage of end-of-quarter pulbacks like the one in Exxon Mobil (XOM) ... to buy more XOM. When Tesla (TSLA) starts throwing off that kind of cash flow, I will have Elon's back ... but that's not going to happen in a slowing economy, the likes of which was warned about by GM (GM) and Micron (MU) now.
So, to paraphrase the legendary Robert Stack from "Airplane": Municipal, bonds, Ted. Triple-tax free. Bonds won't be a great investment from a capital-return perspective in second half, but if you choose the right fixed-income instruments, like the ones in my PREFS model portfolio, you will be just fine.
That should be your goal for the rest of the year ... just fine. If you are going for stratospheric capital gains ... you should strap yourself into your way-back machine and buy Coinbase (COIN) -- in October 2021. In the real world, those sorts of returns just will not exist over the rest of the year, so, please, don't chase the crazy tweets of weak-minded sophists who still cling to the remnants of a dead market. Those growth trades are over. Deal with it. Move on.
I feel like I am the investment coach for a team of misfits, but I will attempt to repeat the extraordinary success of my model HOAX portfolio -- up 28.74% in the first half, plus one day, as I have now adjusted the portfolio for its reinvestment trade, which was to buy Equinor (EQNR) , yet another energy major -- in the second half by doing exactly what I did in the first half. It's not laziness...
When things change, I will alert my Real Money readers, but today is not that day. Keep on keepin' on, my friends. We had a great first half. Let's not alter the performance in the second half with some kind of "for the sake of it" course correction. The world doesn't change that quickly, but as the year proceeds, your portfolio could. Don't let it. Stay the course.