The recent stock market pullback left investors worried that future reports on the U.S. economy might negatively affect their portfolios, especially with July inflation, retail sales, and initial jobless claims data set to be released this week.
Analysts at UBS caution that markets remain highly sensitive to any economic data that falls short of expectations, which could lead to increased volatility as recession fears linger. While this doesn’t necessarily indicate an immediate return to upward momentum, the potential for a renewed risk rally in the medium term remains viable.
Considering these implications, Strategas Securities analysts compiled a list of quality stocks to purchase in case of an additional market pullback.
Picks for you
As chief strategist Jason De Sena Trennert said:
“We believe this is an opportunity for long-term investors to add exposure to companies that are not dependent upon ‘the kindness of strangers’ as the business cycle develops.”
Three stock picks that offer a high long-term growth prospect
In a note released on August 12, Strategas analysts highlighted the importance of buying high-quality names with high-quality spreads.
Considering this parameter, Chevron (NYSE: CVX) is the first pick due to its exposure to the oil industry, which is set to record positive growth despite the electric vehicle (EV) threat, especially in times of rising tensions in the Middle East.
Wall Street analysts rate CVX stock as a “moderate buy,” with a potential 24.31% upside from the latest closing price of $145.02.
Another high-quality stock that took a hit during last week’s selling is Qualcomm (NASDAQ: QCOM); according to analysts, the chipmaker is bound to benefit from Apple’s (NASDAQ: AAPL) internal usage of its internal modem.
Analysts also rate QCOM stock as a “moderate buy” and see a potential 27.45% upside from the August 12 closing price of $162.89.
Perhaps initially an unconventional pick, Match Group (NASDAQ: MTCH) is a company that operates an online dating platform and boasts a free cash flow yield of 10.7%.
Tiprank analysts believe that MTCH stock is also a “moderate buy,” with a potential price rise of up to 23.23% from the latest closing price of $33.77.
The skittish sentiment set to persist among investors
According to UBS, a stock market pullback that erased $2.9 trillion in a single day remains fresh in investors’ minds, further making the investor sentiment fragile, with disappointing inflation, retail sales, or initial jobless claims data this week potentially erasing last week’s gains.
This nervousness is expected to persist until more apparent evidence that the economy isn’t slipping into a recession and until the Federal Reserve signals its readiness to take aggressive action if needed.
UBS anticipates that a stronger case for a soft landing will develop as more positive data emerges—particularly with the following monthly jobs report due on September 6. Coupled with supportive investor positioning and the potential start of rate cuts in September, this could create a favorable environment for risk assets over the medium term and thus create a compelling case for investment in quality stocks.
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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
