As interest rates in the U.S. rise, investors can put their money to work by looking at companies in S&P 500 Kevin O’Leary told CNBC.
“There’s a lot of them. It’s a good place to hide when you’re getting a 2% dividend yield,” the prominent investor said on Thursday.Squawk Box Asia. “
O’Leary’s comment came after Federal Reserve raises benchmark interest rates fell half a percentage point on Wednesday, in line with market expectations.
Fed Chairman Jerome Powell has indicated that a 75 basis point increase in interest rates is “not something the committee is looking at positively,” although market expectations have been heavily tilted towards a three-quarter Fed hike. percentage points in June.
Similarly, O’Leary expressed doubts about such a strong rally, adding that the market is still “in a bull cycle”.
“I don’t think that’s going to happen. You have a lot of interest in Europe, you have Russia Invades Ukraine. You had supply chain problems around wheat and upcoming items because the Ukrainians won’t bring in winter wheat,” he said.
“There [are] a lot of things to worry about, which I think will hold the Fed back. And that’s your friend. “
“I think the question you have to answer is: Can Powell basically glide the plane for a light landing? If you think he can, like me, then you’re in the stock for the long haul.” , venture capitalist, at the same time said. “Shark Tank” host and president of O’Shares ETFs.
“The market at the end of the year [will go through] great number of unstable – more 1000 points per day,” he said, referring to the Dow Jones Industrial Average falling 1,063 points after a rate hike on Wednesday.
The impact of inflation on cash and increase interest rates on long bond – as 10-year US Treasury bond — also leaves few options for people, says O’Leary. This is why he said he will focus on the stock market and buy shares of companies with “pricing power”.
“It’s got the longest maturities, it’s the best capital guard. Stocks still perform in times of inflation… you could argue it’s undervalued, but it’s better than bonds. long term. And it’s definitely better than cash right now.”
When asked where investors can find the most attractive returns in the current market, O’Leary narrowed it down to energy and healthcare stocks.
“I think energy has been a real strong point in providing dividend yields, some of these stocks and now up to 7.8, 9%,” he said.
“People are concerned about what will happen to the price of oil. But the sanctions on Russia will probably maintain the price level where they are. [And] More products coming soon in the US”
He pointed out that the healthcare sector has been “pretty much repressed”.
“A lot of biotech companies have been destroyed by this adjustment, but they really will sustain a lot of growth,” says O’Leary.
“Modernafor example, the numbers are pretty good… I invested in that, as well Pfizer. There [are] The places now where the economy has changed, look very very promising for sales and distribution in general back to shareholders,” he added.
“I think going into a more conservative mission of large-cap, dividend payers isn’t a bad outcome. It’s not a bad place to hide.”