Will the stock market rebound continue? Goldman says…
The stock market has been on the right track lately, with the S&P 500 climbing 13% since June 16 amid optimism that the Federal Reserve won’t raise interest rates much more.
But now Fed officials are making it clear that their rate hikes could continue for a long time. And keep in mind that the S&P 500 remains down 13% year-to-date.
So the question at $64,000 is whether the stock market will continue its recent rebound. It could happen in the short term, Goldman Sachs strategists wrote in a commentary.
“In recent weeks, there has been a partial reversal of [investors’] positioning and sentiment from very bearish levels after a difficult first half, with…positioning bouncing back from all-time lows,” they said.
“We believe that a further increase in positioning is possible in the short term, which could further support the current rally.”
Long term doubts
The picture is different for the long term. “Without clear signs of a positive change in macro dynamics, further temporary risk taking could actually increase the risks of another leg lower in the market,” the analysts said.
“This is especially the case if the positive change is driven by the systematic community and not by fundamental investors.” The systematic community refers to investors who trade on the basis of computer programs.
“Therefore, despite the recent rebound in our positioning indicator, we are not yet confident that we have passed the true low in positioning,” the analysts said. “We believe the path from here is likely to become more dependent on macroeconomic data.”
What’s going on with macroeconomic data? The economy is collapsing. It contracted by an annualized 0.9% in the second quarter, after contracting 1.6% in the first quarter.
And many pundits say Fed rate hikes will push us into recession. So, what stocks could investors turn to for protection against an economic downturn?
Morningstar defines “recession-resistant stocks” [as] stocks of companies whose products and services will continue to be purchased by consumers regardless of the economic climate.
The idea is that in a slowing economy, people will still go to the doctor, keep paying for their utilities, and keep consuming their favorite foods and drinks, wrote Susan Dziubinski, chief content officer for Morningstar.com, in a report.
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Morningstar has compiled a list of the 10 most undervalued and recession-proof stocks covered by its analysts. Undervalued stocks are those trading below Morningstar analysts’ fair value estimates.
Here is the list starting with the most undervalued, as of August 1st.
1. Anheuser-Busch InBev (BUD) – Get the ADR report sponsored by Anheuser-Busch Inbev SA (Belgium)
2. Imperial Marks (IMBBY)
3. Zimmer Biomet (ZBH) – Get the report from Zimmer Biomet Holdings Inc.
4. Medtronic (MTD) – Get Medtronic plc. Report
5. Gilead Sciences (BROWN) – Get the report from Gilead Sciences Inc.
6. rock (RHBY)
seven. GSK (GSK) – Get GSK plc American Depositary Shares (Each representing two) Report
8. British American Tobacco (PSTN) – Get British American Tobacco Industries plc ADR report
9. ambev (bev) – Get Ambev SA American Depositary Shares (Each representing 1) Report
ten. Veeva Systems (VEEV) – Get the Class A report from Veeva Systems Inc.