Bears will always have a reason to bet against the market, even a roaring one like today’s S&P 500 making high after high. Not even the so-called carry trade sell-off triggered by the Japanese yen and U.S. dollar could keep the market down, as it swiftly recovered a couple of days later. Not even NVIDIA Co. (NASDAQ: NVDA) saw lower price action after earnings, which gave bears a break. Never bet against the trend or fight the Federal Reserve (the Fed).
As interest rate cuts could be around the corner, which the CME’s FedWatch tool now predicts will be here by September 2024, there are a few stocks that investors should watch closely to match a bullish bias on today’s market. Some of these have to do with the consumer staples sector, and another is a vital player in the technology sector, but one thing they do have in common is that they are likely to do well no matter what the market does next.
Making this list of upside potential with lower risk profiles is Boeing Co. (NYSE: BA), healthcare provider UnitedHealth Group Inc. (NYSE: UNH), overlaid with software and cloud giant Microsoft Co. (NASDAQ: MSFT). Keeping a bullish bias on the market, here’s why these companies could be likely to shake off any volatility that may come up during the next few quarters and bring investors additional growth and upside.
Travel Growth Fueled by Rate Cuts: Boeing Analysts Take Notice
Despite the recent drama regarding Boeing airplanes, Wall Street analysts still have one big fact to face. Boeing’s demand won’t be coming down any time soon, even though the company is in the middle of fixing its manufacturing process to avoid further incidents and malfunctions.
With interest rates coming in the near term, consumers are probably going to push up pent-up demand for travel. According to the Transportation Security Administration (TSA), the United States has seen a recent surge in travelers, reporting record after record of daily travel volume.
Even as most consumers are choked by inflation, travel is still alive, and as long as that is the case, demand for Boeing aircraft will be okay. This is why Wall Street analysts still forecast earnings per share (EPS) to go from a loss of $4.26 to a net profit of $3.42 in 12 months,
This fast growth and swing into profitability made it easier for those at the UBS Group to place a price target of up to $240 a share for this stock, daring it to rally by as much as 38.2% from where it trades today. However, these analysts weren’t the only ones on Wall Street who showed a bullish bias against Boeing.
Of the $8.9 billion of institutional capital that made its way into Boeing stock over the past 12 months, those at Newport Trust Company boosted their stake by 1.2% as of August 2024, bringing their net investment up to $5.8 billion today.
With Government Medicare Entitlements Rising, UnitedHealth Has Room to Grow
According to USA Facts, the federal government spent about $848.2 billion on Medicare programs, which was roughly 14% of total federal spending. Another $839 billion went into Medicaid, bringing the healthcare entitlement spending over $1.6 trillion for last year alone.
This means good news for stocks like UnitedHealth. As more and more people qualify for these programs, their revenues and fees for connecting entitlements to services rise as well. Being a health insurance company has a double benefit.
With interest rate cuts potentially comes another period of inflation, which insurance companies profit from as they can freely raise prices to keep up and outpace overall inflation.
Warren Buffett hopped on this trend as he recently bought into Chubb Ltd. (NYSE: CB).
Wall Street analysts expect UnitedHealth to grow its earnings by up to 12.8% during the next 12 months, which is optimistic for an insurance company. The UBS Group took the lead on this one as well, seeing a valuation of up to $680 a share and calling for a net upside of 15.2%.
Rising Inflation and Costs Drive Demand for Microsoft’s Cloud Services to Boost Margins
As inflation continues to run and rate cuts could bring back another inflationary cycle higher than today’s, businesses understand the importance of achieving economies of scale at little to no cost. This is where the cloud and artificial intelligence come into play.
Microsoft offers these services through its flagship office products. Still, there is also a new wave of development in cloud applications for businesses of every kind. Microsoft Azure enables businesses to streamline their operations with little additional cost; in fact, it lets them cut unnecessary costs through innovation.
Seeing the writing on the wall, analysts now forecast up to 15.2% EPS growth for the software giant. Those at Wedbush see a valuation of $550 a share for Microsoft stock, calling for it to rally by 31.8% from where it trades today. More than that, bears have also started to retreat ahead of the new business wave.
Microsoft stock’s short interest declined by as much as 5.2% in the past month, showing bearish capitulation.
This leaves room for both institutional and retail investors to pick up where they left off.
