Stock markets around the world have entered bear territory as many investors fixate on the likelihood of an impending recession. However, while some might say, ‘this time is different,’ Capital Group portfolio managers say, ‘we’ve seen this before.’ Steve Watson says “bear markets can be your friend” as the potential for dividend payers to provide relative stability during market turbulence is more important than ever. Investors should hold several high dividend payers as well as dividend growers and consider investing in select tech companies when their shares are beaten down. And while going forward, it will be harder to generate good returns and the factors that drive them will also likely change, Don O’Neal says this signals a welcome return to fundamentals. Investors should focus on holding stocks with good fundamentals like growth companies in the semiconductor, cloud services or search areas, or more value-oriented companies like defense contractors, insurers, or energy companies. Investors are also increasingly embracing companies that make tangible things – that’s why demand for some commodities is benefiting from secular tailwinds, says Carl Kawaja. “Investors should identify a company that has an enduring resource or a cost-effective means of finding and producing more of it, like iron ore,” he says.
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