July 2024 S&P 500 Meltdown: 4 Stocks to Safeguard Your Portfolio

Stocks

Stock	Price	52 Week Range	Marketcap	EPS	Dividend Yield	Chart (24H)	Sector	Employees	Last Updated
Advanced Micro Devices, Inc. AMD	$165.20		268.09B	1.67	0.00%		Technology	28,000	12 hours ago
Microsoft Corporation MSFT	$505.72		3.76T	13.65	0.66%		Technology	228,000	12 hours ago
CME Group Inc. CME	$274.61		98.96B	10.33	1.82%		Financial Services	3,760	12 hours ago
JP Morgan Chase & Co. JPM	$292.24		803.59B	19.49	1.92%		Financial Services	318,477	12 hours ago

July 2024 will be etched into the history books as a remarkable month for the S&P 500, but not in the way we might have hoped. Despite an impressive first half of the year, where the index surged by a whopping 14.5%, it took a disheartening nosedive in July. The drop marks the worst July performance for the S&P 500 since 2014, leaving investors on edge and bracing for the possible aftermath.

As of 11:00 AM ET on July 31, the S&P 500 had advanced 1% in the month, thanks to encouraging financial reports from **AMD** and **Microsoft**. However, without these positive reports, the index would have been down 0.4%, highlighting the fragility of current market sentiment. Here’s a look at the S&P 500 performance in July over the past decade to put this in perspective:

• July 2023: 3.1%
• July 2022: 9.1%
• July 2021: 2.3%
• July 2020: 5.5%
• July 2019: 1.3%
• July 2018: 3.6%
• July 2017: 1.9%
• July 2016: 3.6%
• July 2015: 2%
• July 2014: (1.5%)

July has historically been one of the strongest months for the stock market, with the S&P 500 returning a median of 2.7% during the last decade. But with this year’s tepid performance, it’s crucial to explore what might happen next.

Historical Performance: What August and September Hold

The August Stagnation

History doesn’t lie, and if the past is any guide, August isn’t likely to provide the relief investors are yearning for. Over the years, August has been a month of stagnation for the S&P 500. The term “August Doldrums” aptly describes the median neutral to slightly negative performance this month has historically delivered. Charting the median monthly return in the S&P 500 over the last decade gives us a clearer picture of what to expect:

As shown, the S&P 500 returned a median of 0% in August during the last decade. The outlook is slightly better when extending the time horizon back to 1957, the year the S&P 500 was created, with a median return of 1.1% in August.

The September Effect

But the real concern lies in September. Known as the “September Effect,” this month has a notorious reputation for pulling the rug out from under the market. Historical data suggests a median drop of 2.2% in the S&P 500 during this month. Extending the data back to 1957 changes the decline to a median of 0.7%, but the downward trend in September remains consistent.

Reconciling these data points suggest that the S&P 500 could see a change ranging from a 0.4% upside to a 2.2% downside during the next two months. However, short-term forecasts are notoriously unreliable due to rapidly shifting sentiment and market reactions to headlines.

Examining Key Players in the Current Market

Editor's Note: Analysis and insight for this article were originally sourced sourced from our friends at Motley Fool 

Advanced Micro Devices (AMD): Riding the AI Wave to Potential Gains

Advanced Micro Devices, Inc.

AMD

$165.20

1%

When the market gets choppy, certain stocks manage to stand out, and **AMD** is one of them. The company recently reported robust earnings, riding the wave of the artificial intelligence boom. This positive report gave a temporary boost to investor sentiment, offering a glimmer of hope even as the broader market faced downward pressure. For those looking to invest in semiconductors, AMD remains a compelling choice, driven by its strategic positioning in a rapidly growing sector.

Analyst Ratings and Forecasts

Summary of Analysts’ Outlook:

Analysts are overwhelmingly bullish on **AMD**, with 24 out of 34 analysts recommending a “Buy” or “Overweight” rating. The average price target suggests a potential gain of 24.1% from the current price. Analysts are impressed with AMD’s strong revenue growth, driven by its leadership in the CPU market and increasing market share in the GPU segment. They also expect the company to continue benefiting from the growing demand for artificial intelligence, machine learning, and cloud computing.

Sources:

• Yahoo Finance: AMD Analyst Estimates
• TipRanks: AMD Analyst Ratings
• CNN Business: AMD Analyst Ratings
• MarketWatch: AMD Analyst Estimates

Microsoft (MSFT): 15.1% Potential Gain Says Top Analysts

Microsoft Corporation

MSFT

$505.72

1%

Another titan that has managed to buck the trend—if only temporarily—is **Microsoft**. The tech giant has consistently impressed with its financial performance, particularly in cloud computing and AI sectors. Just like AMD, Microsoft’s strong earnings have occasionally helped stabilize the broader market, albeit briefly. Investors looking for robust tech plays could find Microsoft appealing as a long-term investment.

Analyst Ratings and Forecasts

Summary of Analysts’ Outlook:

Analysts are overwhelmingly bullish on **Microsoft**, with a consensus rating of Overweight (Buy). The average price target of $342.41 suggests a potential gain of 15.1% from the current price. Many analysts have praised Microsoft’s strong quarterly earnings, driven by its cloud computing business, Azure, and its productivity software, Office 365. Additionally, Microsoft’s diverse revenue streams, including its gaming division, Xbox, and its artificial intelligence and machine learning initiatives, are expected to continue driving growth.

Sources:

• Yahoo Finance: MSFT Analyst Estimates
• TipRanks: MSFT Analyst Forecast
• Bloomberg: MSFT Analyst Ratings
• Refinitiv (formerly Thomson Reuters Financial & Risk): MSFT Analyst Estimates

CME Group (CME): Leveraging Market Uncertainty to Gain

CME Group Inc.

CME

$274.61

1%

When market volatility is the name of the game, **CME Group** stands to benefit. As a leader in derivatives markets, increased volatility often translates into higher trading volumes and revenues for CME. Particularly noteworthy is their role in predicting Federal Reserve policies, such as future rate cuts, making this stock a fascinating watch for those attuned to macroeconomic shifts.

Analyst Ratings and Forecasts:

Summary of Analysts’ Outlook:

Analysts have a positive outlook on **CME Group Inc.**, with a consensus “Overweight” rating. The average price target of $194.15 implies a potential gain of 14.1% from the current price. Most analysts believe that CME’s strong market position, diverse product offerings, and growing demand for derivatives will drive its future growth.

Sources:

• Refinitiv (formerly Thomson Reuters Financial & Risk)
• Bloomberg
• FactSet Research Systems
• Yahoo Finance

JPMorgan Chase (JPM): Betting Big on Downside and Making Gains

JP Morgan Chase & Co.

JPM

$292.24

1%

Let’s not forget the financial giant **JPMorgan Chase**. Their predictions carry weight, and their recent forecast suggests significant downside risk for the S&P 500, projecting a potential drop to 4,200 by year-end—a staggering 24% decline from current levels. For those who trust in historical market behavior and reputable forecasts, this is a critical insight that cannot be ignored.

Analyst Ratings and Forecasts:

Summary of Analysts’ Outlook:

Analysts have a positive outlook on **JPMorgan Chase & Co.**, with a consensus “Overweight” rating. The average price target of $143.14 implies a potential gain of 14.1% from the current price. Most analysts expect the bank’s strong financial performance, driven by its diverse business segments and solid balance sheet, to continue in the near term.

Sources:

• Refinitiv (formerly Thomson Reuters Financial & Risk)
• Bloomberg
• TipRanks
• Yahoo Finance

Analyst Performance and Predictions: A Kaleidoscope of Opinions

Bearish Views: Significant Downside Predicted for S&P 500

The bearish voices are loud and numerous. Morgan Stanley hypothesizes that the S&P 500 could plummet to 4,500, which would signify an 18% downside. **JPMorgan Chase** is even more pessimistic, with a year-end target of 4,200. If history is anything to go by, following these kinds of conservative forecasts can often be the wiser bet during turbulent times.

Bullish Optimism: Could the S&P 500 Hit 6,000?

But it’s not all doom and gloom. Oppenheimer is projecting an S&P 500 rise to 5,900, making it a 7% upside from current levels. Even more optimistic is Evercore, with a bullish target of 6,000 by year-end, suggesting a potential 9% increase. These projections hinge on a more favorable economic environment and resilient investor sentiment.

Navigating Macroeconomic Factors: Inflation and Fed Policies

Inflation Trends and Investor Sentiment

Inflation continues to be the elephant in the room, influencing investor sentiment and stock valuations across the board. The Federal Reserve has been grappling with inflationary pressures and their monetary policies will play a significant role in shaping market outcomes over the next few months. According to **CME Group**’s FedWatch tool, the Federal Reserve is expected to make six 25-basis-point rate cuts by July 2025. Lower rates should stimulate the economy by incentivizing consumer and business spending.

Federal Reserve Policies

Speculations and predictions about rate cuts or hikes ripple through the markets, influencing everything from equity to bond performances. Investors must keep a close eye on these announcements to adjust their strategies accordingly. Wall Street analysts expect S&P 500 companies to report an acceleration in revenue and earnings in 2024 and 2025:

• 2023: Revenue and earnings growth of 2.4% and 0.9%, respectively.
• 2024: Forecasted revenue and earnings growth of 5.1% and 10.9%, respectively.
• 2025: Forecasted revenue and earnings growth of 6% and 14.8%, respectively.

Despite these optimistic forecasts, the S&P 500 still trades at 20.6 times forward earnings, a substantial premium to the 10-year average of 17.9 times forward earnings. This elevated valuation means that any deviation from consensus revenue and earnings estimates could trigger market tremors.

Crafting Your Strategy: Long-term vs. Short-term Gains

Long-term Capital Appreciation: Stay the Course for 1,990% Return!

For those with a long-term horizon, the historical performance of the S&P 500 offers reassurance. Over a span of 30 years, the average annual returns have been robust, underscoring the potential benefits of long-term investments. While the road may be rocky, the destination has historically proven rewarding. The S&P 500 returned 1,990% over the last three decades, which is equivalent to 10.66% annually. This period encompasses a broad range of economic climates, suggesting that similar returns are likely in the future.

Short-term Strategy: Capitalizing on Market Fluctuations

Short-term volatility can also present buying opportunities. Stocks like **AMD** and **Microsoft**, which have shown resilient performance, might offer attractive entry points during market dips. However, these moves require a well-thought-out strategy and an unwavering focus on fundamental analysis.

Champions of Your Own Financial Future

As we navigate these turbulent waters, the most important compass is your own intelligence and informed understanding. Trust your analysis and focus on building a resilient portfolio that thrives on long-term goals. The market offers a cacophony of predictions and analyses, but your ability to discern and act on accurate, timely information will be your greatest asset. Stay vigilant, stay informed, and seize the opportunities that align with your investment strategy.

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