🌽 Tired of Stocks? Try Farmland

Happy Sunday to everyone on The Street. It's been kind of a wacky stretch on Wall Street. Two weeks ago, Fed Chair Jerome Powell announced another 0.75 percentage point hike, as policymakers attempt to cool decades’ high levels of inflation. Rate hikes = bad for stocks, right? Yes and no. While that might be true, stocks popped after Powell suggested the central bank could slow its pace of hikes. Many were calling this brief reprieve the, "Powell Pivot" which pushed markets into the green.

Then, this past Friday the July jobs report blew past expectations. More jobs = good for the economy, which presumably is good for companies operating in that economy and therefore their stocks right? Eh, again, yes and no. This plot twist is now being called the "Payroll Pushback" since a hot jobs market (and rising wages) could push inflation up further, causing the Fed to be even more aggressive. 

Zooming out, if you feel like we're living in upsidedown land, you're not alone. Are we in a recession or aren't we? Is a blockbuster jobs report good news or bad news? What are horseshoes? Are there horse socks? Is anyone even listening to me? (Still such a classic movie) Long story short, markets are muddled right now and there's a sense of confusion. Since trading volume is generally lighter in August, this might persist until September. We'll keep an eye on it for you. In the meantime, here are the poll results from last week:

• Do you support or oppose a ban on stock trading for members of Congress? 89% of you SUPPORT a ban.

• Do you think retailers like Walmart and Target will outperform during this back-to-school shopping season? 54% of you said NO

• Do you prefer light beer or hard seltzer? 69% of you said BEER

Review

US stocks were mixed Friday as investors reacted to a stronger-than-expected jobs report. While the labor market has been a bright spot amid this year’s financial struggles, economic data can have a counterintuitive effect on equities given the inflationary environment. That’s because this particular report may convince the Federal Reserve that more aggressive rate hikes are warranted since unemployment remains low and job growth is robust.

The central bank is constantly weighing the need to rein in inflation without causing too much of a disruption to the job market. Specifically, Friday’s nonfarm payrolls showed the economy added 528,000 jobs in July, which exceeded expectations by more than double. Similarly, the unemployment rate ticked down to 3.5% from 3.6% in June, while analysts expected the number to hold steady.

Zooming out, some argue this robust job growth suggests the economy is not slowing which will cause the central bank to maintain its hawkish stance. Sticking with the job market, wages also rose in July, by 0.5% month-over-month and 5.2% on an annual basis.

In company-specific news, Virgin Galactic announced it had delayed the launch of two tourists into space. Zillow Group issued a report showing diminished demand for housing amid high prices and increased mortgage rates. Warner Bros. Discovery announced the new company posted a $3.42 billion loss in the second quarter. Block saw its revenue decline from $4.68 billion to $4.40 billion, as bitcoin contributions plunged. On the flip side, cybersecurity firm Cloudflare popped after it reported that revenue exceeded analysts' expectations.

For the week as a whole, the Dow Jones Industrial Average dipped 0.13%. The S&P 500 rose 0.36%, while the Nasdaq Composite gained 2.15%.

Preview

Tomorrow the New York Federal Reserve will release its three-year inflation expectations for July. In June, the survey showed respondents expected inflation to rise 3.6% three years from now, which was down from the 3.9% predicted in May. Analysts consider this data point important because even the perception of rising prices can impact consumer behavior.

Tuesday, the NFIB Small Business Optimism Index for July is due. June’s index marked a nine-and-a-half-year low. Inflation was identified as the biggest challenge by 34% of business owners, which is the highest level since 1980. Also, keep an eye out for the second-quarter nonfarm productivity reading, which declined 7.3% in the year’s first three months.

Wednesday, the latest inflation data will be the talk of Wall Street as July’s CPI is set to be released. June’s reading showed prices rising 9.1% year-over-year. That market will be watching to see if the Fed’s rate hikes have caused inflation to level off. June’s revised wholesale inventories and July’s federal budget in comparison to the year-ago period are also due.

Jobless claims will be published Thursday. Last week, the number of people filing for unemployment benefits rose to 260,000 which is near an eight-month high. July’s Producer Price Index is also due, which tracks wholesale prices. Surging energy prices contributed to an 11.3% rise in June’s PPI, a near record.

Finally, Friday’s data includes July’s import price index, which rose by a less-than-expected amount in June. The University of Michigan will also publish the preliminary results of its consumer sentiment survey for August, as well as its five-year inflation expectations.

On the earnings front, Tyson Foods (TSN) reports tomorrow, Roblox (RBLX) is up on Tuesday, and Walt Disney (DIS) hands in its report card on Wednesday. Rivian (RIVN) and Spectrum Brands (SPB) round out the week on Thursday and Friday, respectively. Cryptocurrency exchange Coinbase (COIN) is also set to publish its latest earnings on Tuesday. Its share price popped last week when a deal was announced with BlackRock (BLK), in which the investment management company will help its institutional clients purchase bitcoin (BTC).

Invest In Any Asset the IRS Allows. Entrust Holds it For You

Stop right there. Before you keep reading, have you ever heard of a Self-Directed IRA, or SDIRA? If you haven't, or you need a quick refresher, these vehicles are perfect for investors who don't want to be put in a box.

With a Self-Directed IRA, you’re not limited to stocks, bonds, and mutual funds. You have the freedom to invest in assets that you know, and investments that inspire you as long as they’re permitted by the IRS. Real estate, promissory notes, precious metals, and private equity are just the tip of the iceberg.

Ever thought of investing in renewable energy and having a sustainable impact on the world? Want to support a small business you believe in?

Click here to learn more, courtesy of The Entrust Group. They've been in business for over four decades, have $4 billion in assets under custody, and have empowered 45,000 investors.

Looking for tax advantages and alternatives as a hedge against inflation? This is where you start.

The World is Hungry. These Companies Can Help

World Hunger Worsens

The world is facing a hunger crisis brought on by extreme heat which is ruining crops in the Midwest and eastern Africa, the ongoing COVID-19 pandemic, and war in Ukraine. Add record inflation to the mix and it's getting increasingly difficult to provide food to a large segment of the world’s population. 

That is where Deere (DE), Corteva (CTVA), and CNH Industrial (CNHI) come into play. Just like Pfizer (PFE) and Moderna (MRNA) relied on new technology to quickly develop COVID-19 vaccines, these food and farm companies are relying on new advancements to produce more food efficiently. Most importantly, that should reduce food insecurity. It may also boost these companies’ profits.

Deere Has an Edge 

Take Deere and CNH Industrial for starters. Both companies have incorporated drones, robotics, navigation systems, and data analytics into their product offerings. All are aimed at helping farmers be more productive and efficient. With a bigger focus on increasing global food supply, demand for both companies’ equipment should increase. 

Deere is in a particularly good position as a leader in farm equipment with over 6,000 dealers spanning more than 100 countries. It has been able to spend $1.5 billion per year on R&D, giving it a technological edge over rivals. It also launched a subscription service, giving farmers access to the data its tractors and farm equipment collects. 

R&D Spending on the Rise 

CNH says it's quickly catching up to Deere on the technology front thanks to last year’s $1.2 billion acquisition of Raven Industries, the precision agriculture tech company. With the stock off about 30% this year, it's a cheaper alternative to Deere. 

Corteva is also plowing money into R&D, investing about 8% of its sales on next-generation crop tech. The aim is to help farmers boost yields, productivity, and variability in crop output.

A confluence of factors has created a hunger problem the world is struggling to meet. It requires more output and thus new farm equipment. Deere, CNH, and Corteva are playing a big role in providing that, feeding the world, and its investors along the way.

Keep the Lights On With These Utility Stocks

Utilities Are More Than Just a Safe Haven 

For the most part, utility stocks have done their job during the recent sell-off: protecting investors’ cash. The Utilities Select Sector SPDR ETF (XLU) is up 3.7% this year. That compares to the S&P 500’s 13% decline in 2022. 

At a time when corporations of all stripes are cutting their profit targets amid higher input prices and labor costs, utilities are doing the opposite. They are growing. The regulated nature of the industry is providing cover for utilities and investors looking for stability in a volatile market. 

That’s not the only reason utility stocks are looking attractive. There are growth opportunities as demand for electric cars and renewable energy increases, providing more than a safe haven for investors.  

Renewables Driving Growth 

Take AES (AES) for example. The company offers investors both safety and growth. It is moving quickly toward renewable energy, morphing into one of the biggest solar developers in the world. AES also provides wind and battery backup options to firms like Microsoft (MSFT), Amazon (AMZN), and Alphabet (GOOGL). The stock is trading at a discount to rivals and the S&P 500, presenting an opportunity for bargain-hunters. 

NextEra Energy (NEE) also gives investors exposure to the renewable space. The company is benefiting from Florida’s population growth as well, where most of its sales come from. The stock isn’t as cheap as AES but it is in growth mode, with earnings increasing around 8% per year for the past five years.

Safety and Stability is What You Get 

Edison International (EIX) is another cheap way to play the utility market. The stock’s exposure to California and its wildfire season has spooked investors, pounding the stock. However, this also provides a potential entry point. It’s important to note that earnings are projected to grow around 6% per year on average. 

For investors seeking safety and stability from utility stocks, it’s hard to beat Entergy (ETR). Roughly 85% of Entergy’s sales come from regulated utility operations. It's projected to grow around 7% per year in the next few years. 

Utility stocks may not be as sexy as tech or pharma, but they are relatively stable and growing. The same can’t be said for other sectors that have struggled to keep the lights on during the recent volatility.

Get Back to Basics

What is a Self-Directed IRA? What can I invest in? What plans are available? What Does Entrust do? How do I start?

Click here to download the Self-Directed IRA Basics Guide where you'll discover:

• What an SDIRA Can & Can’t Invest In

• Self-Directed IRA Rules

• 3-Step Guide to Self-Directed Your IRA Funds

• And Much More

It takes 2 seconds, click here to get started.

Tired of Stocks? Try Farmland

Farmland Outperforms the S&P 500 

If the equity market has left you battered and bruised this year, maybe it’s time to get some fresh air and explore other options. Farmland, for example, may be worth considering. Not only does it provide diversification, but it's a tangible asset that tends to hold its value when inflation is rising. For 25 years ending in March of 2021 farmland in the US posted an annual return of 11.2%. The S&P 500 gained 9.6% during the same period. 

Prospects look even better now given the increasing global demand for food (see section 1) and limited supply of arable land. Over the past two decades, 11 million acres of farmland in the US have been lost to development. Climate change is also limiting available farmland.

Steady and Stable Returns 

For investors the biggest return on farmland comes from the rental income derived from leasing land to farmers. That rental income tends to be stable even when the stock market is tanking. Investors also get to benefit from the long-term appreciation of the farmland. It doesn’t hurt that the sector has low debt-to-asset ratios, which means rising interest rates shouldn’t dent the investment. 

Owning the land outright isn’t the only way investors can get exposure, even though it's been the preferred method of institutional investors. Today there are several ways to invest including private funds, real estate investment trusts, and ETFs. All provide varying levels of risk and return.

Several Ways to Play it 

On the REIT front there’s Gladstone Land (LAND) or Farmland Partners (FPI), which both own and operate US farmland. Farmland Partners owns 340 farms and has returned close to 41% in stock gains and dividends since it went public. 

Another option is to buy shares of farms via companies like AcreTrader. Returns are derived from rental income distributions and the sale of property. There are also real estate asset funds like Versus Capital Real Assets (VCRRX) that give you farmland exposure. 

Farmland isn’t the first investment people think of when diversifying a portfolio but it’s worth considering. With so many ways to invest, it provides a way to diversify and ride out the current volatility in the stock market.

This communication from The Street Sheet is for informational purposes only. It is not intended to serve as a recommendation to buy, sell, or hold any security and is not an offer or sale of a security.  Information contained within should not be perceived as a research report and is not intended to serve as the basis for any investment decision. Any third-party views reflected herein do not reflect the opinion of The Street Sheet. All investments involve risk and the past performance of a security does not guarantee future results or returns. There is always the potential for financial loss when investing in securities or other financial products. Investors should consider their investment objectives and risks before investing. The Street Sheet is reader-supported. When you buy through links on our site, we may earn an affiliate commission.