Today’s episode of Full Court Finance at Zacks dives into where the market and the economy stand amid downbeat consumer sentiment and growing recession fears. The heavy selling that sent the S&P 500 into a bear market could come back following a nice bounce back. Still, investors with long-term outlooks might want to consider buying some blue chip tech stocks at deep discounts. The two stocks we explore today are Microsoft (MSFT) and Adobe (ADBE).
Stocks made a bit of a comeback this week after a rough stretch that saw the S&P 500 fall into a bear market and post its worst showing since the initial covid crash in March 2020. The positivity could mean that some on Wall Street are starting to think the Fed’s rate-hike efforts are now nearly fully baked into stock prices.
Others might be betting that the economy will slow enough that the central bank won’t have to raise its rates much further. Another very real possibility is that this is just another bounce within a longer-term pullback.
Calling a bottom in real-time is extremely difficult and no one knows what the economy will look like by the end of the summer. Determining what’s next is made harder amid seeming contradicting data that shows super low unemployment, millions of job openings, and strong overall consumer spending, contrasted with ultra-low consumer sentiment, soaring inflation, and slowing GDP projections.
The Fed’s goal is to engineer a so-called soft landing for the economy, which will be difficult. But there are already signs of cooling in the housing market, tech-sector jobs, retail spending, and more. And valuations are continuing to be compressed in the face of higher interest rates. The second quarter earnings season and the June CPI print (due out on July 13) might prove hugely pivotal in the near term.
The unknowns are obvious and there is clearly more downside potential. Luckily, investors with long-term horizons don’t need to be worried about exact market timing and might want to utilize the current uncertainty and downbeat consumer attitudes as a chance to start positions in great stocks at solid discounts.
The first blue chip technology stock we explore is Microsoft MSFT. The technology titan has tumbled from its November peaks and it trimmed its sales and earnings guidance at the start of June due to currency headwinds. But Microsoft recalibrated its long-term trajectory with its expansion into the booming cloud computing industry and its outlook remains really impressive following a big stretch of double-digit growth.
Next up is creative and design software powerhouse Adobe ADBE. Adobe stock is down over 40% from its peaks and it topped our quarterly estimates on June 16. Wall Street is, however, worried about its near-term outlook after it provided slightly lower guidance due to a strong U.S. dollar and other near-term setbacks. Adobe’s fall could provide a great entry point into a fantastic stock.
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