Need to Know: Brace for a volatile 2022, but cling to this tech stalwart when the storm comes, says investment adviser

While a Deutsche Bank chart (below) reveals more tech-bubble worries, our call of the day makes a case for one of the biggest tech stalwarts, Apple
AAPL,
+0.51%,
saying the iPhone maker has an ace in the hole that few are paying attention to.

That call comes from investment adviser Wedgewood Partners, who kick off their fourth-quarter 2021 client letter with a warning about market volatility for 2022, triggered by central bankers who are about to usher in some market chaos by pulling the plug on years of cheap money. Even Chinese President Xi Jinping was heard warning the Fed not to hike interest rates at a virtual Davos on Tuesday.

However, the adviser also sees opportunities ahead as selling picks up speed, and they plan to stick to Apple, which they’ve owned for 16 years.

While Wedgewood said it couldn’t foresee the many products the company unveiled, “we did know that Apple’s vertically integrated [software and hardware] product development strategy was unique and extremely capable of creating products and experiences that customers thought worthwhile enough to spend growing amounts of time and money on,” said the adviser.

Today, that strategy remains intact, but more important Apple is commanding a key new realm, having developed over a dozen custom processors and integrated circuits, since launching its “A-series” processors. For example, one it produced in 2017 provided the iPhone X with enough power to operate FaceID 3-D algorithms, used to unlock phones and make digital payments.

“Apple has effectively created a semiconductor business that rivals and even surpasses some of the most established semiconductor-focused businesses in the industry,” said Wedgewood. “Apple continues to differentiate through vertical integration, which has been a hallmark of Apple’s long-term strategy to grow and capture superior profitability. It is difficult to predict what new products will be unveiled; however, we think this strategy should continue to serve
shareholders quite well.”

Other top positions recommended by Wedgewood include telecom group Motorola
MSI,
+0.09%,
another tech stalwart Microsoft
MSFT,
+1.77%
and retailer Tractor Supply
TSCO,
-3.82%.

Here’s a final comment from Wedgewood about the stock storm it sees brewing. “The graphic below reminds us that when speculation reigns, markets can go far higher than what seems sober,” but when they fall “markets will repeat their long history of falling faster and further than what seems sober.”

“Long term investors should root for such downside. Such times are opportunities to improve portfolios. Our pencils are sharpened for opportunities as Mr. Market serves them up.”

The markets

Goldman Sachs
GS,
-2.52%
just added to a disappointing batch of bank results from last week, with shares down as earnings fell short. and Charles Schwab
SCHW,
+2.30%
ahead, along with Kinder Morgan
KMI,
+1.82%
and Alcoa
AA,
+1.45%.

An unpublished study by an Israeli hospital showed second Pfizer
PFE,
-1.06%
-BioNTech
BNTX,
-3.44%
or Moderna
MRNA,
-2.59%
boosters aren’t halting omicron infections. Separately, Moderna’s CEO Stephane Bancel said his company is working on a combined flu/COVID booster, while White House chief medical advise Dr. Anthony Fauci, said it’s too soon to tell if omicron will bring us out of the pandemic.

Another study says COVID infections are turning children into fussy eaters due to parosmia disorders that distort their sense of smell. And China state media says packages from the U.S. and Canada had helped spread omicron, as Hong Kong gets ready to cull thousands of hamsters.

An airline lobby group is warning of “chaos” for U.S. air travelers due to 5G services rolling out this month, in a letter signed by big carriers, UPS
UPS,
-1.87%
and FedEx
FDX,
-0.56%.

The New York Empire state manufacturing index for January is due ahead of the market open Tuesday, followed by a National Association of Home Builders index for the same month.

Larry Fink, chairman and chief executive of BlackRock
BLK,
-2.19%
said investors need to know where company leaders stand on societal issues.

Retailer Walmart 
WMT,
-0.28%
is looking at creating its own cryptocurrency and nonfungible tokens, according to U.S. patent filings.

The markets

U.S. stock futures
ES00,
-0.92%

YM00,
-0.74%
are under pressure Tuesday led by those for the Nasdaq-100
NQ00,
-1.50%
as bond yields
TMUBMUSD10Y,
1.812%

TMUBMUSD02Y,
1.018%
surge across the curve. Oil prices
BRN00,
+0.76%

CL00,
+1.22%
are surging after Iran-backed Houthi rebels launched a deadly drone attack on a key oil facility in Abu Dhabi. Goldman Sachs also predicted Brent could top $100 a barrel in 2023.

Losses spread to Asian
NIK,
-0.27%
and Europe stocks
SXXP,
-1.03%,
with a key German bund yields
TMBMKDE-10Y,
-0.028%
about to turn positive for the first time in three years.

The chart

A January survey of more than 500 investors polled by Deutsche Bank shows a slightly gloomier mood. For example, they are more bearish:

Many, especially those over 34, think tech shares are in a bubble:

And they continue to see inflation as the biggest risk to markets, but are also fretting a more aggressive Fed:

Here are the top stock tickers on MarketWatch as of 6 a.m. Eastern Time.

Random reads

Tulsa pastor apologizes for wiping his saliva on a man’s face during a sermon.

The high environmental cost of your beloved fish-oil pills.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

Want more for the day ahead? Sign up for The Barron’s Daily, a morning briefing for investors, including exclusive commentary from Barron’s and MarketWatch writers.