September is traditionally a challenging month for the stock market, yet the first interest rate cut by the U.S. Federal Reserve in four years has helped markets defy this trend. To date, the S&P 500 has increased approximately 1% this month and risen about 8% since the end of June, a period marked by considerable volatility. However, uncertainties such as the U.S. election, inflation, and geopolitical factors pose significant questions about the future trajectory of stocks.
David Bianco, Chief Investment Officer for the Americas at DWS, commented that the Federal Reserve appears to prioritize preventing a downturn over concerns about potential inflation increases. He believes this rate cut reduces the likelihood of a recession and anticipates a steepening of the yield curve as an outcome. Bianco also noted that the banking sector, along with solid growth stocks in healthcare and software sectors at reasonable valuations, could benefit from this situation.
Simon Webber, Head of Global Equities at U.K. asset manager Schroders, observed that while equity markets were susceptible to a correction after a robust nine-month period, company fundamentals remain sound. This heightened volatility, according to Webber, presents opportunities for strategic repositioning amid market dislocations. He highlighted that the U.K. market is one of the most attractively valued globally compared to its long-term history, whereas U.S. market valuations appear less demanding when excluding Big Tech and mega-growth stocks, which inflate the overall price-to-earnings ratio of the S&P 500.
In light of these insights, CNBC Pro employed FactSet to analyze the S&P 500 and MSCI World Index, identifying stocks that have outperformed the market this year and may continue to do so in the second half of the year and beyond. The criteria for this analysis included stocks that have increased more than 13% so far in 2024, have at least half of analysts rating them as a buy, and have consensus price targets offering at least 20% upside. These stocks emerged in the screening process.
