Interest rates

Higher interest rates encountered with historic rebound

US equities posted their best week in 17 months, despite the arrival of higher interest rates. The S&P 500 rebounded more than 6% last week, led by the consumer discretionary and information technology sectors.

As the battle between Russia and Ukraine continued, the domestic focus was on interest rates. As expected, the Federal Reserve on Wednesday announced its first rate hike since 2018.

The Fed hiked 25 basis points and signaled it expects similar increases at its six remaining meetings in 2022. Meanwhile, the full-year forecast for U.S. GDP growth was reduced to 2.8%.

Elsewhere, U.S. retail sales and core producer price (PPI) growth came in below expectations in February.

The week ahead

Adobe (ADBE) and Nike (NKE) report a relatively quiet earnings schedule next week.

Economically, we will see new home sales on Wednesday, followed by durable goods orders on Thursday. March data also starts rolling in on Thursday with preliminary Purchasing Managers’ Index (PMI) readings for the U.S. manufacturing and services sectors.

Following the rapid recovery in equities in recent quarters from pandemic lows, we believe investment gains will be harder to come by in 2022 given the slowing growth outlook and the outlook for interest rates. higher interest.

Therefore, deciding what and when to buy can be difficult for any investor. However, the fact remains that attractive investments are available if you are willing to dig a little deeper. One of these healthcare names deserves a closer look and is our stock of the week.

Action of the week: Abbvie (ABBV)

The stock gained almost 7% last week and we believe this outperformance can continue into the first half of 2022. Here’s why:

Abbvie is developing immunological treatments, including Rinvoq (rheumatoid arthritis) and Skyrizi (psoriasis).

On Thursday, the company received additional FDA approval for Rinvoq, for the treatment of ulcerative colitis. Earlier this year, the company said it expects its two main products to generate combined annual revenue of $15 billion by 2025.

Abbvie’s current growth potential manifested itself in February. Management recorded quarterly results that exceeded expectations. The company posted earnings of $3.31 per share in the fourth quarter of 2021. This was driven by demand for its immunology products.

Abbvie returns a portion of these profits to investors, in the form of a 3.5% dividend yield. Management also paid off $17 billion in debt last year.

The stock is currently valued at just 11.2 times expected earnings over the next four quarters. On the other hand, Abbvie is expected to record average annual earnings growth of 21.9% over the next three to five years, which is above the overall market and industry average.

In the meantime, the title displays a Smart Score of 9/10 on TipRanks. This proprietary score uses Big Data to rank stocks based on 8 key factors that have historically been a precursor to future outperformance.

See a full stock analysis here >>

In addition to the positives already mentioned, the Smart Score indicates that stocks have seen improved sentiment among analysts, individual investors and financial bloggers.

For your information: this is just one of the 20 stocks selected for the Smart Investor portfolio. This is where we share more detailed information about our weekly title picks.

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