The S&P 500 is a market index of the 500 largest publicly traded companies in the U.S. stock market exchange. The S&P 500 has around 80% of the entire market capitalization of public companies in the country, and it is generally known as the more reliable investment.
However, investors should still be cautious about buying S&P 500 stocks and should complete due diligence beforehand. Specifically, during this time of high interest rates, consumer discretionary companies often struggle to bring high returns if this macroeconomic headwind continues.
Despite their stability, they will most likely experience slowing growth shortly due to macroeconomic conditions and a declining reputation resulting from too aggressive cost-cutting efforts. Many of these companies are implementing corporate-wide layoffs and facing a fall in revenue, indicating no sign of growth in the near future. Below are three S&P 500 stocks investors should sell before they crash.
S&P 500 Stocks to Sell: Home Depot Inc (HD)
Home Depot (NYSE:HD) is the largest U.S. home improvement retailer, selling items ranging from furniture to decorations. Based in Atlanta, Georgia, the company has been an American home supplies powerhouse for the past few years.
While Home Depot has long established itself as the country’s most popular home improvement retailer, the company is currently suffering from macroeconomic conditions. Struggling with the high mortgage rates and inflation, Home Depot reported a decline in sales for the past three consecutive quarters. By the nature of discretionary projects, customers are less likely to invest in home improvements such as furniture or bedroom remodeling in times of high inflation or a downturn.
In the first quarter of 2024, Home Depot reported a 2.3% decrease in sales year over year. For the past year, the company has experienced consecutive revenue losses, and there are no signs of recovering from this downfall.
Nike (NKE)
Nike (NYSE:NKE) has long been America’s favorite clothing brand. Established as the largest athletic footwear and apparel company in the world for decades, Nike still remains consumers’ top place to shop for athletic wear. Despite its strong brand recognition and image, the corporation has not performed well financially recently.
In the past months, the sneaker giant has announced its plan to cut around 2% of its total workers as part of its cost-cutting initiative. As of now, Nike is expecting a decline in sales and revenue in the first half of next year, which is a major reason behind Nike’s efforts to reduce its production costs. The company’s stock has been suffering heavily since the beginning of the year, dipping more than 12% year to date and down 23% year to year.
Furthermore, earlier this month, Nike’s CFO Matthew Friend sold 9,350 shares of the company, indicating a gloomy future for Nike.
Chipotle (CMG)
Chipotle (NYSE:CMG) is an American-style Mexican fast-food restaurant that has grown extremely popular in the past decade due to its taste and casual dining experience at an affordable price. Given its convenience and quality, considering its price, it was especially popular among younger people who prefer the accessibility of fast food at such an affordable price. Chipotle has pioneered and established the fast food bowl culture, which led to its immense success and growth.
However, this is the exact reason why investors should sell Chipotle. The biggest problem Chipotle is currently facing is its declining reputation, and customers are losing faith in the company. In a restaurant industry where customer loyalty plays a major role, Chipotle is losing a lot of its popularity due to shrinking portion sizes. For a company that thrives off of quality food at a reasonable price and good portion, this fundamental mistake directly translates to a loss in popularity and revenue. While this might seem like an easy fix, the executives have not been able to regain the faith of the customers, which I think will lead to a decline in the company.
On the date of publication, Andy Kim 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.
