Federal Reserve Chair of the United States Jerome Powell continues to sound a hawkish tone, saying that inflation remains “too high” and warning markets that “we are prepared to raise rates further.” Powell reiterated that the Fed remains focused solely on lowering the U.S. inflation rate back down to its 2% annualized target. Currently, inflation sits at 3.2%, and many economists expect it may take some time for consumer prices to return to the Fed’s target level. All of this and more is making more and more Americans believe that a market crash is coming.
It is likely that the Fed funds rate could remain in its current range of 5.25% to 5.50% (its highest level in 22 years) for considerably longer. Interest rates could also be ratcheted even higher in the coming months. What impact will this have on the stock market and economy? It’s difficult to say. Some prominent investors, such as Michael Burry of the “Big Short” fame are now betting on a market crash. Analysts and economists continue to debate whether the economy will orchestrate a soft landing, i.e. avoid a recession despite high interest rates. Regardless of the ultimate outcome, here are three solid stock picks for any eventuality. These are especially good buys if we do indeed get a soft landing.
Lowe’s (LOW)
Home improvement retailer Lowe’s (NYSE:LOW) reported decent second-quarter financial results and maintained its full-year guidance as its store traffic and sales continue to hold up in the current high interest rate environment. The company reported Q2 earnings per share (EPS) of $4.56 versus $4.49 that had been forecast on Wall Street. Revenue in the April through June period totaled $24.96 billion, which was slightly below the $24.99 billion that analysts had estimated.
More impressively, Lowe’s maintained its full-year guidance, saying it continues to anticipate revenue between $87 billion and $89 billion, along with full-year EPS of $13.20 to $13.60. While the company acknowledged that consumer spending has softened heading into the summer months, it continues to see strong sales from contractors and construction companies. LOW stock has gained 12% so far this year and is up 105% through five years. Stockholders also get a quarterly dividend payment of $1.10 per share, for a yield of right around 2%.
Medtronic (MDT)
Medical device manufacturer Medtronic (NYSE:MDT) deserves more love from investors. The company just reported a classic beat and raise, lifting its profit forecast after posting better-than-expected financial results. The company based in Dublin, Ireland said its strong earnings are due to growing demand for its medical devices, particularly those used in heart and gastrointestinal procedures. Medtronic also said that it’s benefiting from a rise in non-urgent and elective surgeries that were put on hold during the Covid-19 pandemic.
Medtronic’s revenue rose 4.5% to $7.70 billion, besting Wall Street’s consensus estimate of $7.57 billion. EPS came in at $1.20, which was better than the $1.11 that had been forecast by analysts. Sales of Medtronic’s heart devices, its biggest revenue driver, increased 5.5% to $2.85 billion. Looking ahead, Medtronic, which makes pacemakers, catheters, and other lifesaving medical devices, said it expects its full-year profit to be between $5.08 and $5.16 a share, up from a prior range of $5 to $5.10.
Curiously, MDT stock is down 8% over the last 12 months, and has declined 15% over the past five years. Investors should see the decline as a buying opportunity, especially given the essential nature of the company’s products. Medtronic has also increased its dividend, which yields 3.36%, for more than 45 consecutive years. This is a soft landing stock you should buy during an anticipated market crash, for sure.
Macy’s (M)
Walmart (NYSE:WMT) wasn’t the only retailer to post strong results for Q2 of this year. U.S. department store chain Macy’s (NYSE:M) also put up strong numbers, beating Wall Street expectations on the top and bottom lines. The company reported EPS of 26 cents a share versus 13 cents that had been forecast among analysts. Revenue in the quarter totaled $5.13 billion compared to $5.09 billion that was anticipated. Macy’s maintained its earnings and sales forecasts for the remainder of this year. If there’s a market crash on the horizon, it doesn’t appear to be affecting Macy’s.
The fashion retailer continues to expect EPS of $2.70 to $3.20 for all of 2023, and full-year revenue between $22.8 billion and $23.2 billion. Macy’s also announced that both UnderArmour (NYSE:UAA) and Nike (NYSE:NKE) merchandise is returning to its store shelves in the current third quarter after being excluded for many years. This is a catalyst that should boost future sales. Despite the good news, M stock took a hit. It fell nearly 20% in the days after its Q2 print.
The decline was partly due to a broader drop in all retail stocks, and on news that sales at its upscale department store chain Bloomingdale’s fell 2.6% in Q2. With M stock now down 40% on the year and offering an attractive quarterly dividend that yields 5.48%, this is definitely a stock to buy on the dip and hold onto should we get a market crash.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
