St. Anthony: Most Minnesota company stocks have lost value so far this year. What is the next step ?

The stock market, often a harbinger of the economy, has fallen so far this year.

The reasons are varied, rooted in soaring oil and gas prices amid Russia’s war on Ukraine, shipping shortages and disruptions that have contributed to annualized inflation of 8% year-on-year. and higher interest rates from the Federal Reserve.

The S&P 500 index of America’s largest companies was down 16% through May 13, the Russell 2000 index of small companies was down 25% and the Piper Sandler Minnesota index of Minnesota’s 50 largest public companies was down. down 19%.

Most publicly traded companies on the Star Tribune 50 list posted negative total returns through mid-May.

Few corporate stocks have gained ground this year.

Northern Oil & Gas, up 34.2%, is one of them. Others are so-called defensive stocks that have weathered economic downturns quite well: General Mills (1.8%), Xcel Energy (11.4%) and Patterson Cos. (8.7%). Logistics company CH Robinson, which is working to smooth supply chain routes for customers around the world, was in positive territory until Wednesday.

But over the past three years, only 15 of Minnesota’s 50 largest public companies have lost value. This group includes Protolabs, down about 62%. From their IPO in 2020 or 2021 through the end of last week, shares of Bright Health are down 88%, those of Jamf Holding are down 39%, those of Sun Country Airlines are down 33.6% and those of of Life Time Group Holding by 32%.

Andy Serwer, a financial journalist and commentator who serves as editor of Yahoo Finance, wrote that the market correction doesn’t necessarily mean the United States is headed for a recession. But there are growing headwinds, market downside energy and inflation, which “are more than enough to cause the global economy to contract.”

For stock investors, the best way to protect themselves is to stay diversified and keep the money you’ll need two to three years from now out of the market, according to many financial advisors. The market has largely rewarded the diversified investors that we were able to retain during the 2008-2009 plunge of almost 50%.

The S&P 500 fell from 800 in early 2009 to 4,800 in December, ahead of the 2022 decline.

Martha Pomerantz, a veteran Twin Cities financial advisor and partner at Evercore Wealth Management, sees clouds but not falling skies.

Pomerantz is among advisors who encourage clients to maintain enough cash and fixed income assets to meet several years of living expenses. This money can be moved into stocks as “entry points” emerge.

“While we expect continued volatility, given investor concerns about inflation, interest rates and supply chains, we remain confident investors in U.S. markets,” Pomerantz said in a statement. email response to questions. “While earnings growth rates are lower than last year, underlying business fundamentals remain strong and the recent compression in price-to-earnings multiples – the amount investors are willing to pay for every dollar of earnings – has brought U.S. equities a lot closer to fair value.”

Pomerantz also noted that stocks generally act as a long-term hedge against inflation, especially for companies “with the power to raise prices to offset rising input costs.”

There’s a chance things will work out amid the current economic anxiety, said Jim Paulsen, economist and chief investment strategist at Leuthold Group.

The biggest domestic threat is inflation, he said.

And Paulsen, who has been more right than wrong for 40 years in several investment magazines, believes that inflation has peaked, that the Federal Reserve’s interest rate easing will gain momentum in the six months, that commodity prices will fall, based on recent indicators, and that inflation could fall from 8% to less than 4% by the end of the year.

That should ease fear in the stock and bond markets and appease a worried Main Street.

“The fundamentals of the economy are really sound,” Paulsen said. “We are re-employing people. The workforce is growing at 3% per year for six months. This is almost unheard of in the second year of an economic recovery. We are still reopening the economy and rebuilding the inventory [following the COVID-19 pandemic].”

And compared to the 2008-2009 recession, consumer and bank balance sheets are stronger. In addition, companies have a lot of cash to invest.

There are more jobs than Minnesotans looking for work.

Let’s hope Paulsen is right — that things turn out well for our workers, our entrepreneurs and our economy. And that Russia is brought under control and the violence decreases, and anxious people around the world have enough to eat and a better future.

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