As you probably know, the stock market is going down this year. At the end of June 12, the S&P 500 was down 21% year-to-date.
If it sustains those levels through the end of the month, it would be the S&P 500’s biggest drop in the first six months of a year since 1970. The index also fell 21% over that period, according to Bloomberg.
Wells Fargo analysts believe the weakness in stocks will continue. “A Hard Landing” [for the economy] Our base case has become,” he wrote in a comment.
“We believe markets are beginning a downturn as the economy shows its highest equity beta in decades – ie the sell-off sentiment in equities, then discretionary spending and finally the economy,” analysts said.
As for the stock rally, “we’re not looking for a level, we’re looking for an event (or occurrence) where stocks can stabilize,” analysts said. “If the market thinks the Fed’s rate hike will ease, the stock is likely to fall. We think it’s still a long way off.”
Meanwhile, analysts assembled a “bearish portfolio” that included the stocks with the least price volatility in each of the 11 S&P 500 sectors.
Here are 10 options:
MC Donalds (Delhi Municipality) – McDonald’s Corporation reports getting fast-food restaurant titan;
Mondelez (MDLZ) — Mondelez International Inc., the food company that makes Oreos. receive reports;
chevron (CV) – Get the report of Chevron Corporation, the big oil producer;
Berkshire Hathaway (BRK.B) – Berkshire Hathaway Inc. Get Report, a group led by Warren Buffett;
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Merck (MRK) – Pharma giant Merck & Company Inc. receives reports;
General mobility (goal difference) – Aerospace company, General Dynamics Corporation receive reports;
IBM (ibm) – International Business Machine Corporation report received, technology icon;
dow (Do you) – Dow Inc. Report Received, Chemical Company;
fountain tower (Spring) – Welltower Inc. Get Reports, a healthcare REIT; and
Duke Energy (duke) – Get the report of Duke Energy Corporation (Holding Company), the utility giant.
stocks versus bonds
Meanwhile, bonds have also declined this year, with the Bloomberg US Aggregate Total Return Bond Index falling 12%.
So for investors who have the money to work with, which is a better deal, stocks or bonds? The Street asked five experts and their answers were mixed. Three said stocks, one said bonds and a fifth said neither.
Michael Sheldon, chief investment officer at RDM Financial Group Hightower, chose equities as the best deal given their historical outperformance versus bonds.
“Bonds provide income and stability while stocks provide income and growth,” he said. “The stock has more upside but is more volatile.”
Jack Ablin, chief investment officer at Crescent Capital, chose the bond as a better deal. He said both stocks and bonds are basically at fair value after the fall.
But bonds are likely a better deal than stocks right now, at least for the next few quarters, Ablin said. That’s because “the bond yield is high enough to act as a hedge for the stock,” he said. The five-year government bond recently returned 3.22%.