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A New Year’s Resolution You Can Keep

New Year’s Eve was a sedate affair at my house. My wife and I are too pragmatic to spend all day waiting for midnight to arrive, so we use Greenwich Mean Time to mark the arrival of another year at 7:00 p.m. our time. That leaves plenty of time to celebrate afterward while still getting to bed at a reasonable hour.

That also gives me an extra five hours to contemplate the year to come. As far as I’m concerned, you can never start planning too soon.

A lot of people make resolutions at the start of each new year. In addition to vowing to start going to gym three times a week, improving one’s financial condition is usually high on the list.

We can make that easy for you. Last week, our team of analysts shared their views on the major investment themes over the remainder of this year. If you missed it, I suggest you go back and read through each of the “3 Questions for 2018” which can be found on Investing Daily’s homepage.

On Friday, I also pointed out what I believe to be the single biggest threat to the stock market this year, which is the risk of rising inflation. Its been a long time since we had to worry about higher interest rates, but I believe that time has arrived.

All of the ingredients for rising inflation appear to be materializing simultaneously. Higher oil prices, a tight labor market and a trillion dollars (or more) of additional debt added to the federal deficit as a result of last month’s tax cut may be too much for the Fed to ignore.

In addition, many corporations may use their newfound tax savings to bid up the price of materials, labor and other items that determine the price of goods sold. If so, then it won’t be long until they have to raise prices to offset those higher costs.

The good news is you can profit from that scenario by owning the right type of stocks. There will be winners in a rising interest rate environment, including companies in the energy, materials, and financial services sectors.

Our team of analysts provided a short list of stocks expected to outperform the market this year in the December 27 issue of Personal Finance.

If you have not done so already, now is the time to examine every stock in your portfolio to determine if it will end up in the ‘winners’ or ‘losers’ category once interest rates start ramping up.

You should also think about the geographic mix of your portfolio. As the old saying goes, there is always a bull market somewhere. In this case, we think Asia and Europe may outperform the U.S. stock market this year, so having exposure to those regions can help mitigate the risk of rising inflation at home.

As the Chief Investment Strategist for Personal Finance, my New Year’s resolution is to provide the same type of level-headed, timely advice that has helped our readers achieve their financial goals for the past 42 years. 

Please join us.

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