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Expect mid-to-late cycle dynamics to play out once the inflation scare recedes, meaning financial, energy and materials companies will do best. Then indexes will rebound.
Stocks to keep an eye on include Shell, Eli Lilly and Ulta Beauty.
The investing environment is not nearly as bad as it seems. Good days are ahead.

“Segments of the health-industry should also perform better than most,” says Andrew Graham, founder and managing partner of Jackson Square Capital, pointing to Eli Lilly, in particular.
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Today’s investment landscape appears bleak, seemingly plagued by a host of factors, including mounting inflation, rising interest rates, an economic contraction during the first quarter and a war in Ukraine that has exasperated already lingering supply-chain issues.
Add it all together, and it’s been a horrible year for stocks. The tech-heavy Nasdaq shed 13% in April, its worst month since the Financial Crisis, and has lost more than a quarter of its value this year.

Other indexes have fared better, but not much. The Dow Jones Industrial Average is off nearly 12% thus far in 2022, while the S&P 500 Index is down more than 16%.
Yet it’s important to keep in mind that what spurred the market’s descent was not a confluence of the issues mentioned above — it was the Federal Reserve. As 2021 drew to a close, fundamentals were reasonably solid. Corporate earnings growth remained strong; the labor market, though tight, was healthy and adding jobs; and consumer balance sheets were in good shape.
More from Personal Finance:What the Fed’s half-point rate hike means for your moneyAs mortgage rates rise, should you buy a home or rent?Rising interest rates mean higher costs for car loans
However, at the beginning of January, policymakers began to signal that they would start to raise rates and rein in their bond-buying program. From that point, the S&P 500 began to tumble, shedding nearly 16% over the next four weeks.
In retrospect, the drawdown should not have surprised anyone. Markets declined by similar amounts the previous four times the Fed began to remove policy accommodation, in 1983, 1994, 2004 and 2015. Notably, however, in each instance, stocks rebounded quickly and reached new highs within 12 months of hitting bottom.

Granted, this is hardly a significant statistical sample. But it’s the sample we have, and for a few reasons, history is likely to repeat itself this time around.
For one, bearish sentiment recently hit a record low, according to a survey compiled by the American Association of Individual Investors. Over the years, when the market outlook is this one-sided, it’s a good contrarian indicator that the opposite will happen.

Similarly, when institutions — hedge funds, pensions, etc. — go light, it’s also a signal to pounce. Such investors are currently underinvested in equities, meaning the market will soon run out of sellers.
The biggest issue, though, is inflation — it’s simply not as bad as most fear. 
When the Fed began to talk about raising rates earlier this year, the bond market reacted reasonably, with yields climbing slowly. Then, Russia invaded Ukraine, increasing the chances that fuel and food costs would rise, and nerves began to fray. Investors responded by bidding up Treasury Inflation-Protected Securities, or TIPS, causing inflation-breakeven yields to skyrocket.
Even so, inflation has likely peaked. Indeed, the upcoming data will have a hard time matching May 2021 comps. At the time, vaccines had just become widely available, which caused spending at retail stores and restaurants to spike as more and more people ventured out.

Therefore, what we are seeing now is a panic, one that could quickly recede once we get more data.
So, what does all this mean?
For starters, expect mid-to-late cycle dynamics to play out once the inflation scare recedes, meaning financial, energy and materials companies will do best. After that, look for indexes to recover and then reach new highs sometime near the end of this year led by cyclical/value stocks.
Specifically, Shell is a name to watch the rest of 2022. As alluded to above, many energy companies are well-positioned in today’s environment, but Shell has perhaps the most upside. The reason, in large part, comes down to liquefied natural gas.

Liquid natural gas a solid bet

A liquid natural gas (LNG) tank.
Artinun Prekmoung / Eyeem | Eyeem | Getty Images

The easier-to-transport form of natural gas is perhaps the key to making Europe less reliant on Russian oil exports. The company dominates this market segment, delivering more than 65 million tons last year.
More broadly, Shell’s integrated gas business represents around 40% of its net asset value, and the company’s scale allows it to generate big margins in dislocated markets. This year, the stock could gain another 30% and pay out a 3.5% dividend.
Segments of the health-industry should also perform better than most. Eli Lilly has the most potent existing pharmaceutical lineup within this sector, and its pipeline is promising.
Though the company’s long-term prospects could hinge on the efficacy of Donanemab, an Alzheimer’s drug in testing that could be a game-changer, shorter-term, the concern is a weight-loss drug aimed at combatting obesity.

It showed promising results in a recently concluded clinical trial. If approved, the drug represents a huge, multi-billion-dollar opportunity.
Meanwhile, despite a recent public relations snafu, Ulta Beauty controls a significant percentage of the high-end beauty and cosmetics market. Admittedly, it lost some ground during the Covid shutdowns, but it is adding more inventory to its remaining physical locations in an effort to capture even more share of this segment.
More and more white-collar professionals returning to the office spells good things for its business, while the cost savings it has created in recent years (it has closed roughly 2,000 stores since 2019) also help.
Fear is a powerful emotion. But that’s where many investors are right now — gripped by fear. And while no one should discount the challenges of the current landscape, the environment is not nearly as bad as it seems. Good days are ahead.

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California’s statewide average for a gallon of gas has surged to a record above $6.
The national average for gas hit $4.523 on Tuesday, according to AAA, also a record.
The rapidly rising price of gas is contributing to inflationary pressures across the economy.

High gas prices at stations in Garden Grove, California, on Monday, March 7, 2022.
Jeff Gritchen | Medianews Group | Getty Images

California’s state average for a gallon of gas has surged above $6, making fuel in the Golden State the most expensive across the U.S.
The average price at the pump in California hit a record $6.021 per gallon on Tuesday, according to AAA. Prices are up 31 cents over the last month, and $1.89 higher than a year ago.

California’s prices are the most extreme, but gas is rising across the country.
The national average hit a record $4.523 on Tuesday, with every state now averaging more than $4.
The sharp jump is in part thanks to a rise in oil prices, which makes up more than half of the ultimate price of gas.
“The high cost of oil, the key ingredient in gasoline, is driving these high pump prices for consumers,” Andrew Gross, AAA spokesperson, said Monday in a statement.
“Even the annual seasonal demand dip for gasoline during the lull between spring break and Memorial Day, which would normally help lower prices, is having no effect this year,” he added.

But oil is not the only factor that influences gas prices, and a lack of refining capacity is also pushing up prices.
Refiners turn oil into petroleum products like gas that we use daily. Demand for products is surging as economic activity returns, but refining capacity is lower than pre-pandemic levels, which is contributing to the rapid price rise.
Retail diesel prices are on the move, too, with the national average for a gallon hitting a record $5.573 on Tuesday. Prices are up $2.40 over the last year.

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United’s 52 Pratt & Whitney-powered Boeing 777s have been grounded since an engine failure in February 2021.
The airline plans to begin flying the aircraft this month and bring them back gradually.

A United Airlines Holdings Inc. Boeing 777-200 aircraft on the tarmac at San Francisco International Airport (SFO) in San Francisco, California, U.S., on Thursday, Oct. 15, 2020.
David Paul Morris | Bloomberg | Getty Images

United Airlines said Tuesday that the Federal Aviation Administration has cleared the path for the return of 52 Pratt & Whitney-powered Boeing 777s that were grounded after an engine failure in February 2021.
“Late last night, the FAA issued the final paperwork on our Pratt & Whitney-powered triple sevens,” United’s chief commercial officer Andrew Nocella said at a Bank of America industry conference.

The planes represent 10% of United’s capacity, “so it’s really, really material,” Nocella added. ‘You really can’t rush safety.”
“The FAA approved the service bulletins that will be used to make the necessary changes outlined in the Airworthiness Directives to the Boeing 777-200 with Pratt & Whitney PW4000 engines,” the FAA said in a statement.
United last week said it plans to bring the planes back gradually once they were cleared, starting later this month, and later expand them to international routes.
The planes were grounded after one of United’s 777-200s heading for Honolulu from Denver suffered an engine failure. It dropped debris in a residential area before returning to Denver’s main airport. No injuries were reported.
The planes’ return had been delayed through at least May 13 from an expected return in April, CNBC reported last month.

United shares were sharply higher in premarket trading Tuesday after the carrier reported it expects second-quarter revenue per seat mile, a gauge of how much it’s bringing in for each seat it flies a mile, to rise as much as 25% over 2019, even though it would fly about 14% less.
The trend shows higher fares for travelers, who have returned in droves after two years of pandemic.
“We’re not seeing any signs of resistance to pricing,” United CEO Scott Kirby said in an interview on CNBC’s “Squawk Box” on Tuesday morning.

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Walmart missed earnings expectations for the fiscal first quarter, as the retailer felt cost pressure from fuel prices, higher inventory levels and overstaffing.
The nation’s largest retailer on Tuesday raised its sales outlook for the year, but lowered its profit expectations.
CEO Doug McMillon said the discounter’s bottom line results “were unexpected and reflect the unusual environment,” as inflation in the U.S. is at a nearly four-decade high.

Walmart on Tuesday reported quarterly earnings that missed Wall Street’s expectations by a wide margin, as the nation’s largest retailer felt pressure from rising fuel costs and higher levels of inventory.
Shares were down nearly 7% in premarket trading.

The company raised its outlook for sales this year, saying it expects net sales to increase about 4% in constant currency for the full year. It previously anticipated a 3% increase.
But Walmart also lowered profit expectations. Earnings per share for the year will decrease by about 1% compared with the mid single-digit increase it previously expected, the company projected.
In an interview with CNBC, Chief Financial Officer Brett Biggs said the significant jump in fuel prices, elevated labor costs and aggressive inventory levels weighed on the company. He said some merchandise arrived late and other items, such as grills, plants and pool chemicals, didn’t sell due to “unseasonably cool weather in the U.S.” 
Plus, he said, Walmart employees returned from Covid leave quicker than expected and caused the company to become overstaffed during part of the quarter. He said those scheduling challenges have been resolved.
The discounter’s bottom line results “were unexpected and reflect the unusual environment,” CEO Doug McMillon said in a release Tuesday morning. Inflation in the U.S. is at a nearly four-decade high.

“We’re adjusting and will balance the needs of our customers for value with the need to deliver profit growth for our future,” he said in a news release.
Here’s what the discounter reported for the fiscal first quarter ended April 29, according to Refinitiv consensus estimates:

Earnings per share: $1.30 adjusted vs. $1.48 expected
Revenue: $141.57 billion reported vs. $138.94 billion expected

In the quarter, Walmart’s net income fell to $2.05 billion, or 74 cents per share, from $2.73 billion, or 97 cents per share, a year ago. Excluding items, the company earned $1.30 per share. That’s lower than the $1.48 that analysts were expecting, according to Refinitiv.
Total revenue rose to $141.57 billion from $138.31 billion a year earlier, above Wall Street’s expectations of $138.94 billion.
Same-store sales for Walmart U.S. grew 3% compared with the year-ago period or 9% on a two-year basis. E-commerce sales rose 1% or 38% on a two-year basis.

Average ticket for customers in the U.S. rose 3% from the year-ago period. Transactions on the company’s website and stores were flat.
Walmart-owned warehouse club, Sam’s Club, saw same-store sales increase 10.2% year over year or 17.4% on a two-year basis.

Walmart is a much-watched company as investors and economists look for clues about how the American consumer is weathering inflation – and if they are starting to pull back on spending. The consumer price index, a broad measure of prices for goods and services, increased 8.3% in April compared with a year ago, according to the Bureau of Labor Statistics.
Grocery, Walmart’s top sales category, is one of the hard-hit categories. Food costs rose 9.4% in April on a 12-month basis, according to unadjusted data from the BLS.
As shoppers look for value, Walmart is gaining market share in grocery, Biggs said. However, sales of food are pressuring margins, since items like eggs and cereal drive lower profits than discretionary merchandise like apparel and electronics.
Biggs said Walmart sees signs that some households feel budget strapped. For example, he said sales of half-gallons of milk and its private brand of lunch meat have jumped.
“There’s some signs of changed behavior in some customers due to inflation,” he said. “They’re certainly taking notice of inflation.”
On the other hand, he said, there’s still demand for the newest gaming consoles and patio sets. He said the second quarter is “off to a good start from a sales perspective,” with outdoor and apparel categories getting a lift from warmer spring weather.
Shares of Walmart closed Monday at $148.21. The stock has risen about 2.5% so far this year, outperforming the broader market as investors seek out consumer staples among economic uncertainty. The company’s market cap is nearly $408 billion.
Read the company’s earnings release here.
This story is developing. Please check back for updates.

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General Motors once led the world in auto sales, and still, with some exceptions, leads the U.S.
Now the automaker hopes to become a leader in electric vehicles on its home turf and beyond.

The Detroit company has made massive investments in EV technology in a bet that its new Ultium platform — consisting of batteries, motors, software and other components — will help it to outpace competition from legacy automakers and countless start-ups and eventually replace Tesla as the No. 1 EV maker.
The automaker unveiled its Ultium EV platform in March 2020 and as is delivering the first vehicles built around it this year.
At the heart of the Ultium platform are GM’s batteries. They were developed in partnership with LG Energy Solutions, a division of the Korean conglomerate LG Corp.
The batteries use a highly unusual chemistry that reduces expensive and tough-to-source cobalt by 70%. That move, the company says, will help push battery pack costs below $100 per kilowatt-hour — commonly considered to be a critical threshold for EVs to be competitive with internal combustion engines.
GM’s system for managing its battery pack is also different from competitors. The Ultium platform allows GM to run battery cells with different chemistries in the same pack, so parts of the pack can be replaced as time goes on.

It’s innovations like these that GM says will make it a leader in EVs in North America by 2025. Tesla dominated the U.S. market in 2021.
But competition from other automakers is stiff. And there are many more challengers on their way, from just about every corner of the world.
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The 2022 CNBC Disruptors are 50 private companies growing and innovating through a challenging market and changed world, while inspiring change in their larger, incumbent competitors.

Founder: Kate Ryder (CEO)Launched: 2014Headquarters: New York CityFunding: $202 millionValuation: $1 billionKey technologies: N/AIndustry: Health carePrevious appearances on Disruptor 50 List: 0

Persephone Kavallines

Maven is the largest virtual clinic for women’s and family health, and as of last August, it also became the first female-focused health start-up valued at over $1 billion, or so-called unicorn status.

Offering technology-based care for fertility, pregnancy, and parenting, Maven has grown quickly from a service that in its early days was popular with college students seeking quick telehealth advice, to a scalable digital health program now being used by large employers and health plans.
As with many emerging technologies in the health-care space focused on bridging the gap between digital and the patient as a consumer, Covid-19 accelerated the uptake and acceptance of Maven’s business model, even if the premise for the business was in place from well before the pandemic. 

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“We saw it in the fact that 50% of U.S. counties were without a single OB-GYN. We saw it in galling racial disparities across fertility, maternity, and pediatric care. We saw it in the lack of financial support for LGBTQ+ family building. And, in the U.S., the richest country in the world, we saw it in the highest maternal mortality rate in the industrialized world,” Maven founder and CEO Kate Ryder wrote in a blog post at the time of its big fundraise.
Over the past year, Maven has added 100 new clients, including five of the Fortune 15 companies, one of them being Microsoft. Among existing clients, which include L’Oreal, 50% expanded their use of Maven services last year as it invested in new programs, including enhanced care management for high-risk patients, a service to match patients with providers of the same background (race, ethnicity, sexual identity, religion, etc.) and MavenRx, which focuses on managing the cost and complexity of fertility medications.
The August 2021 historic $110 million in Series D funding was co-led by Dragoneer and Lux, but Maven has also attracted the interest of powerful, successful American women. Oprah Winfrey joined the round, adding to Maven’s roster of celebrity backers, which includes Mindy Kaling, Natalie Portman, and Reese Witherspoon.

The round was more than just a milestone for Maven – female founders received just 2% of all U.S. venture capital funding in 2021.
Female health tech — also referred to as femtech — is gaining traction. Fertility company Progyny, a three-time CNBC Disruptor 50 company, has grown to a valuation of roughly $4 billion as a public company and has doubled in value since its first trade in 2019. And despite the fact that women-founded firms still receive an inequitable share of venture investment, 2021 was a breakout year for femtech specifically, according to a PitchBook report, with global venture capital investment surpassing $1 billion for the first time. 
With its recent funding, Maven is focusing on reaching new populations, including Medicaid, which is responsible for paying for nearly half of all U.S. births. 
Like many start-up founders, Ryder’s determination to create Maven came partially as a result of personal experience, in her case medical frustration and trauma. A miscarriage left her feeling “lost, discouraged, and confused why something so painful and physically taxing was considered outside the bounds of traditional healthcare,” she wrote in a post.
Now a mother of three, she has had a newborn in the natal intensive care unit, a painful recovery from a C-section, and describes herself as the “biggest critic” of Maven products.
The company boasts work on behalf of over 10 million families across 30-plus medical specialties, and is adding more employers at a time of return-to-work for many caregivers. Whether a new parent navigating return-to-office, the same-sex couple seeking adoption; women suffering from fertility issues; or institutional biases in the current health system, Ryder sees a similar underrepresented community problem to be solved.
“For all of these patients, and countless others, digital health offers a way to be seen, heard, and supported,” Ryder stated.

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Home Depot on Tuesday raised its full-year outlook after reporting strong quarterly earnings, fueled by the company’s strongest first-quarter sales on record.
For 2022, Home Depot is now expecting sales growth of about 3% and earnings per share growth in the mid-single digits.
This marks Ted Decker’s first quarter at the helm of the company.

Home Depot on Tuesday raised its full-year outlook after reporting strong quarterly earnings, fueled by the company’s strongest first-quarter sales on record. Shares of the company rose 4% in premarket trading.
Here’s what Home Depot reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

Earnings per share: $4.09 vs. $3.68 expected
Revenue: $38.91 billion vs. $36.72 billion expected

The home improvement retailer reported first-quarter net income of $4.23 billion, or $4.09 per share, up from $4.15 billion, or $3.86 per share, a year earlier. Analysts surveyed by Refinitiv were expecting the company to earn $3.68 per share.
Net sales rose 3.8% to $38.91 billion, topping expectations of $36.72 billion. Same-store sales increased 2.2% in the quarter.
“The solid performance in the quarter is even more impressive as we were comparing against last year’s historic growth and faced a slower start to spring this year,” CEO Ted Decker said in a statement.
This marks Decker’s first quarter at the helm of the company. Decker, a longtime Home Depot veteran, previously served as chief operating officer and inherited the top job at a tough time for home improvement.
Inflation keeps climbing, which may lead consumers to put off renovation projects. Rising interest rates could result in a slowdown in the hot housing market and delays to expensive home improvement plans. And many consumers spent the early days of the pandemic painting their walls, buying new patio furniture and taking care of other do-it-yourself projects that won’t need to be repeated for at least a few years.

But Tuesday’s results show that consumers are still willing to spend money on their homes, and the company isn’t expecting the trend to reverse.
For 2022, Home Depot is now expecting sales growth of about 3% and earnings per share growth in the mid-single digits. The company previously forecast “slightly positive” sales growth and earnings per share growth in the low-single digits.
Read the full report here.

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The 2022 CNBC Disruptors are 50 private companies growing and innovating through a challenging market and changed world, while inspiring change in their larger, incumbent competitors.

Founder: Michael Rubin (CEO)Launched: 2011Headquarters: Jacksonville, FloridaFunding: $4.2 billionValuation: $27 billionKey technologies: Artificial intelligence, cloud computing, machine learningIndustry: RetailPrevious appearances on Disruptor 50 List: 2 (No. 25 in 2019)

Persephone Kavallines

Fanatics has established itself as the leader for sports merchandise and commerce, with exclusive licensing deals ranging from the NFL and NBA to the International Olympic Committee.

Now it’s looking to expand its sports industry reach even further, setting its sights on digital collectibles, sports betting, and trading cards.
Its recently launched NFT and digital collectible company, Candy Digital, secured initial exclusive rights with MLB and the MLBPA to create digital products around baseball, aiming to do what Dapper Labs, ranked No. 10 on this year’s Disruptor 50 list, has done around the NBA. Candy Digital said it raised $100 million in Series A round from investors like SoftBank’s Vision 2 Fund and former NFL quarterback Peyton Manning, valuing it at $1.5 billion.

More coverage of the 2022 CNBC Disruptor 50

Last year, Fanatics hired former FanDuel CEO Matt King as part of an effort to break into the now booming U.S. sports betting market. While it made an unsuccessful bid for a New York online sports betting license, losing out to companies like DraftKings, Caesars and FanDuel, Fanatics is reportedly looking at potential acquisitions in the space.
Perhaps the biggest part of the sports business industry Fanatics is disrupting is trading cards. The company surprised many last August when it landed a deal with MLB to be its partner for cards, supplanting Topps in the process, which had become nearly synonymous with baseball cards dating back to 1952. It also secured the trading card licenses for the NFL and NBA.
Fanatics then acquired the Michael Eisner-owned Topps in January for roughly $500 million following Topps’ $1.3 billion SPAC merger that fell apart after it lost the MLB rights.

It also saw a sports commerce boon as leagues welcomed back fans to stadiums and largely played seasons unencumbered by Covid-19. Fanatics has said it is projecting $4.5 billion in revenue for its e-commerce business in 2022, up from $2.3 billion before the pandemic. The company claims it has more than 80 million users across its businesses, providing further business opportunities for its new ventures geared towards sports fans.
All of that has helped Fanatics raise several rounds over the last year. The latest, in March, totaled $1.5 billion from investors like the NFL, NFL Players Association, MLB and the NHL. Other investors include Fidelity, BlackRock and Michael Dell’s MSD Partners, among others.
Fanatics’ valuation has seen a jump as a result to $27 billion, up from $18 billion less than a year ago.
“We’re thinking about how to build a company that’s beloved by billions of sports fans globally,” Fanatics CEO and founder Michael Rubin said at the MIT Sloan Sports Analytics Conference in Boston on March 4. “Valuation just follows the business results.”

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