By Barbara Kollmeyer
Investors who have been unsure about the Fed’s no-mercy inflation policy, have likely got the message now.
And as markets adjust to the prospect of more hikes from a central bank that plans to “keep at it until it’s done,” with threats of an escalating war in Europe and energy crisis hovering in the background, the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.09% may struggle to revisit the summer nadir.
“Given today’s [Wednesday’s] downside reversal and a continued lack of any capitulatory signals, we think the path to the June lows (3,640) might be faster than many anticipate,” BTIG’s chief market technician Jonathan Krinsky tells clients, though he dangles some hope.
“The bad news is we are still in one of the weakest seasonal windows of the year, especially in a midterm year. The good news is that it quickly reverses by mid-October. We think we test or break the June lows before then, which should set up a better entry point for a year-end rally,” said Krinsky.
Investors would be forgiven for feeling like they’ve been backed into a corner right now when it comes to investment options. That brings us to our call of the day from Credit Suisse, which offers a “protective moat for uncertain times” via dozens of companies with solid business models.
Note the bank is currently recommending an underweight stance on equities owing to “potential downside risk to 2023 earnings estimates to the tune of 15% to 20% for the S&P 500.” They see a “highly uncertain” growth outlook caused by aggressive central bank responses to sticky wage growth and Europe’s energy crisis. Strategists expect U.S. growth to reach just 0.9% in 2023, with a 0.2% contraction in the eurozone.
Still, Richard Kersley, head of global equity research and his team asked analysts across several regions to “identify companies whose earnings may not be immune to, but should be better shielded from economic uncertainty thanks to the high barriers to entry that surround their businesses.“
“Stocks selected reflect examples of companies that have shown a superior ability to innovate, their first mover advantage or simply a scale advantage that has developed a market leading position and with it stronger pricing power,” he said.
And rather than limiting picks to defensive sectors or styles, they cast a wide net and come up with 35 outperform-rated stocks with an “economic moat across regions.” Bolded names represent those with above-consensus earnings estimates and target prices, as well most anti-consensus calls.
Americas: Air Products /zigman2/quotes/201523430/composite APD -0.72% , Autodesk /zigman2/quotes/209828392/composite ADSK +3.12% , McDonald’s /zigman2/quotes/203508018/composite MCD -0.61% , Microsoft /zigman2/quotes/207732364/composite MSFT -1.01% , NextEra /zigman2/quotes/200558509/composite NEE +0.34% , PPL /zigman2/quotes/207772352/composite PPL -1.36% , Reynolds /zigman2/quotes/216150988/composite REYN +0.50% , Hershey /zigman2/quotes/202765576/composite HSY -1.73% , Thomson Reuters /zigman2/quotes/203550191/composite TRI -0.85% , Union Pacific /zigman2/quotes/209717171/composite UNP +0.11% , Visa /zigman2/quotes/203660239/composite V +0.51% .
EMEA: Air Liquide /zigman2/quotes/206822858/delayed FR:AI +0.38% , ASML /zigman2/quotes/210293876/composite ASML +1.72% /zigman2/quotes/206208657/delayed NL:ASML -0.59% , Assa Abloy /zigman2/quotes/209593756/delayed SE:ASSA.B +0.07% , Coloplast /zigman2/quotes/206586833/delayed DK:COLO.B +1.39% , Diageo /zigman2/quotes/205611832/delayed UK:DGE +0.84% /zigman2/quotes/208129584/composite DEO -1.26% , Edenred /zigman2/quotes/204329243/delayed FR:EDEN +0.40% , Experian /zigman2/quotes/210252954/delayed UK:EXPN -0.65% , Haleon /zigman2/quotes/236012088/delayed UK:HLN -0.17% , Legal & General /zigman2/quotes/201125471/delayed UK:LGEN +0.26% , LSEG /zigman2/quotes/206625606/delayed UK:LSEG -0.07% , National Grid /zigman2/quotes/208805676/delayed UK:NG -0.34% , Reckitt Benckiser /zigman2/quotes/206856088/delayed UK:RKT +0.19% , Schneider /zigman2/quotes/200216351/delayed FR:SU +0.37% , Sika /zigman2/quotes/200712565/delayed CH:SIKA -0.17% , Smurfit Kappa /zigman2/quotes/208768615/delayed IE:SK3 +3.11% , Wolters Kluwer /zigman2/quotes/207940915/delayed NL:WKL -0.04% .
Asia Pacific: AIA /zigman2/quotes/203565558/delayed HK:1299 -2.60% , CP All PCL TH:CPALL -5.48% , CTOS Digital /zigman2/quotes/227833438/delayed MY:5301 +0.69% , Hindustan Unilever /zigman2/quotes/206253666/delayed IN:500696 +0.90% , Intl Container /zigman2/quotes/207125957/delayed PH:ICT -3.14% , PT Bank Mandiri (Persero) Tbk , Samsung Biologics /zigman2/quotes/206016987/delayed KR:207940 -0.55% , Samsung Electronics /zigman2/quotes/209800866/delayed KR:005930 +0.14%
Check out Day two of MarketWatch’s Best New Ideas in Money Festival. It’s not too late to sign up, and here’s an interview you may have missed with legendary investors Ray Dalio and Carl Icahn .
Stock futures /zigman2/quotes/209948968/delayed ES00 +0.23% /zigman2/quotes/210219788/delayed NQ00 +0.26% /zigman2/quotes/210407078/delayed YM00 +0.48% are back and forth, but now in the green , with 2-year Treasury yields /zigman2/quotes/211347045/realtime BX:TMUBMUSD02Y -0.45% at the highest since 2008 . The dollar index /zigman2/quotes/210598269/delayed DXY +0.48% was hovering at 2002 highs, until the Bank of Japan intervened for the first time in 25 years after leaving key interest rates unchanged. Oil prices /zigman2/quotes/209723049/delayed CL00 +1.75% are higher.
Asian equities /zigman2/quotes/210597971/delayed JP:NIK +0.50% /zigman2/quotes/210598030/delayed HK:HSI +0.29% stumbled and the Korean won /zigman2/quotes/210561794/realtime/sampled USDKRW +0.6366% hit its lowest in 13 years. Europe equities /zigman2/quotes/210599654/delayed XX:SXXP +0.37% aren’t faring much better.