A strong economy

The next US Federal Reserve meeting is expected to mean a 50 basis points hike in the Fed funds rate. This is equivalent of a 0.5% interest rate hike and has sparked fear of a still-bigger stock market correction. The Fed has a history of being too hawkish and spurring recessions, which affects markets globally, including here in the UK. Nonetheless, Moore thinks that the US economy is strong enough to handle multiple rate hikes this year. This is backed by strong employment numbers, heavy assets, and positive earnings results. He also believes inflation is close to reaching its peak. Nonetheless, oil remains the biggest issuing affecting consumer prices. The black gold could spark chaos again if it spikes above $100 per barrel.

Moore sees this year’s stock market correction as being short-lived due to the positive economic data coming in. He expects new market highs to come at some point next year. This should happen once inflation cools down and supply chain bottlenecks ease. Unfortunately, that’s where his bullishness ends. He thinks those new highs could be followed by a potential recession soon after, and into early 2024. This is most likely to happen once ‘stagflation’ (High inflation, but slow or no real economic growth) starts to take effect.

Time is my best friend

Will all that deter me from investing? No. There are four cycles in investing — accumulation, mark-up, distribution, and legacy. This was mentioned by Moore in my interview with him. As a young investor, I’m currently in the accumulation phase. This phase is where I see buying opportunities with attractive valuations during a bear market. Moore sees the current US market correction as a buy-the-dip opportunity for me, as I begin to pick up good discounts on mega-cap companies with healthy balance sheets, attractive margins, and pricing power. The tech-heavy Nasdaq in the US is down over 12% so far this year. That presents plenty of opportunities for me to buy shares in big US-listed tech companies such as Amazon, Alphabet, and Microsoft.

My buy the dip strategy

As Warren Buffett once said: “A diversified portfolio with exposure to different sectors is protection against ignorance.” This same advice was alluded to by Moore in our interview. The main takeaway was for me to invest more in a variety of value and dividend stocks. These can include commodities, insurance, and healthcare.

I was also pleasantly surprised to find out that Moore follows a similar buying strategy to mine. And he continued to encourage me to buy the dip. This means buying when I see around a 5% to 10% decline in a specific stock. When I asked him how much cash I should be leaving on the side to buy those dips, he mentioned 15-20% of my investment portfolio.

Ultimately, my purchases would be dependent on my risk assessment during any market fall, of course. But I will be buying the dip in mega-cap companies with excellent fundamentals for my portfolio.

The post Should I buy the dip in this stock market correction? appeared first on The Motley Fool UK.

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John Choong owns shares of Alphabet (Class A Shares) at the time of writing. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and Microsoft. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

News of the Omicron Covid variant has sent markets reeling around the world, providing patient investors with an excellent opportunity to buy shares they had on their watchlists. However, not all are the great deals they may seem and I am personally avoiding as many as I am buying.

Rolls-Royce

I’ve talked a lot about Rolls-Royce and I stand by what I’ve said. It has great brand recognition, an excellent history of making good quality products. Royce has also been able to secure military contracts with both the UK and US governments, which will bring in revenue for several years to come. As a high-quality manufacturer, however, it has high operating costs and potential upsets to global supply chains knock investor confidence. This is why I believe the share price fell by nearly 12% on Friday. There aren’t many deals as good as this on the stock market and I am adding it to my portfolio as we speak.

International Consolidated Airlines Group SA (LSE: IAG)

IAG has fallen a further 12% since last week as news of the Omicron variant brought back fears of international flight shutdowns. The airline seems to be a favourite of investors who think that an end to the pandemic will bring its share price roaring back to pre-2020 highs.

The only problem with that assessment is the assumption that the pandemic will simply be announced to be over one day. The world will eventually get through this storm, but it could be years before the final cases are completely eliminated.

Between now and then, who knows how many new variants will be discovered? Even in ordinary times, IAG is a highly volatile asset. It has spent years bouncing between highs of nearly 500p and lows of just under 100p. It is currently trading near just shy of 100p, but since I’m not willing to become a trader, this is one I’m steering clear away from.

SSP Group (LSE: SSPG)

SSP is a multinational food contract service. It operates around 2,800 branded retail units in airports, train and bus stations around the world. Naturally it was hit hard by the initial Covid lockdowns. The share price has taken a further loss of around 15% over the last few days, and currently trades for 214p. However, I think that SSP will fare far better than IAG. In the years before Covid, SSP increased its revenue and its profit margins. It also paid down debt and saw steady, sustainable growth in its share price.

There is a lot of pent-up demand for both air travel and food services. But reopening small cafes domestically have far fewer issues than operating international flights. Small retail units also have much lower operating costs than airlines. Once the world gets back on track, I believe SSP is in a good position to regain its pre pandemic share price of 550p.

The future

No one can be sure what will happen because of the Omicron variant. This could be a flash crash or the start of a much longer decline. But Warren Buffett famously said “Be fearful when others are greedy and greedy when others are fearful.” I see a lot of fear right now.

The post Omicron variant flash crash: 3 shares I’m buying or avoiding now appeared first on The Motley Fool UK.

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• Up 55% and a P/E of 6.6, is this FTSE 100 share too cheap to miss?
• IAG share price vs budget rivals: which airline share looks better value in 2026?
• The red lights are flashing for this FTSE 100 share! Will it crash?
• After tanking 20% in March, is this a bargain-basement value stock?
• Down 20% in 5 weeks: what’s going on with the IAG share price?

James Reynolds has no position in any of the shares mentioned. The Motley Fool UK has recommended SSP Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.