Starting the session following Labor Day weekend in the red, it’s clear that even so-called S&P 500 stocks to buy are feeling the heat. Toward the end of August, Federal Reserve chair Jerome Powell presented a less-than-encouraging picture for future monetary policy. Essentially, Powell remains concerned about multidecade highs in inflation. Therefore, he aims to tackle it through higher interest rates.
Fundamentally, then, even the best S&P 500 stocks to buy face a major paradigm shift. For decades, the U.S. economy enjoyed the fruits of an accommodative or dovish monetary policy. During the initial onslaught of the coronavirus pandemic, the Fed implemented an inflationary directive. Now, it needs to scale back the monetary spigot, which implies a future trajectory of deflation.
Unfortunately for many public companies, deflation is a killer. Under this scenario, the dollar rises in relative value over time. Therefore, investors need to be compelled with an extraordinary opportunity to set aside what are effectively guaranteed returns by doing nothing and sitting on greenbacks. However, some S&P 500 stocks to buy earn the underlying title because of their exceptional relevance.
Below are seven blue chips making the rarefied list that you should consider.
Earlier this year, Chevron (NYSE:CVX) and other oil and natural gas firms enjoyed the most cynical of tailwinds. When Russia invaded Ukraine, it understandably set off a chain of geopolitical reverberations. Long story short, western powers imposed severe sanctions on Russia. Predictably, the Kremlin responded in kind, holding massive amounts of global energy supplies effectively hostage.
In theory, Powell’s directive to attack inflation through increased borrowing costs should be a net negative for CVX. With the purchasing power of the dollar likely to rise in a deflationary environment, Chevron and similar S&P 500 stocks to buy would not enjoy a repeat of the bonanza earlier this year. However, Moscow will apparently not miss an opportunity to miss an opportunity.
Recently, the Kremlin stated that it will not resume natural gas flows to Europe via the Nord Stream 1 pipeline unless the west lifts its sanctions. However, it’s a roundabout admission that the sanctions are imposing pain on the Russian economy.
Still, Moscow seems intent on riding the crisis of its own doing to the bitter end. Therefore, CVX remains one of the best S&P 500 stocks to buy.
For anyone interested in studying behavioral analytics associated with the Covid-19 crisis, Morning Consult provided an indelible resource. It reports that as of June 2022, a majority of Americans feel comfortable socializing with others in public. This profile represents a dramatic pivot from April 2020, where between 13% to 15% felt the same way.
Stated differently, American society currently paves a comeback trail to normal social routines. Fundamentally, this backdrop should benefit AbbVie (NYSE:ABBV). A pharmaceutical giant, AbbVie became very intriguing when it acquired Allergan. Now, Allergan makes Botox, which via injections temporarily relaxes facial muscles that cause wrinkles.
Because Covid-19 fears have largely faded into the rearview mirror, elective procedures should rise in demand. When you consider that more people are willing to socialize with others, looking one’s best suddenly takes on greater importance. Thus, even with current economic challenges, ABBV may be one of the best S&P 500 stocks to buy.
One of the most common pieces of advice that you may encounter regarding a stock market selloff is to batten down the hatches. However, humans are not robots. No matter what else may be going on, everyone needs to blow off some steam.
Indeed, the concept is scientific. Per Northwestern Medicine: “Research shows that after a cheat meal, the body increases its metabolism, causing you to burn calories faster. This is caused by increased levels of leptin, a hormone secreted by fat cells and responsible for maintaining energy balance in the body.” It’s a perfect segue to mention beverage maker PepsiCo (NASDAQ:PEP).
Essentially, PepsiCo benefits from the cheap thrills thesis. With economic pressures rising, people may turn to certain vices as a blowoff valve. Of course, some vices impose more harm than others. With Pepsi, a can of caffeinated cola can help improve mood and focus. Therefore, PEP is well worth putting on your radar of S&P 500 stocks to buy.
If you’re unsure where the economy is heading — whether inflation, deflation or something else entirely — you’re not alone. The new normal continues to impose head-scratching dynamics on the regular. Nevertheless, if you want to put your money to work during these ambiguous times, Costco (NASDAQ:COST) is one of the best S&P 500 stocks to buy.
Primarily, it comes down to the core customer base. Out of the major big-box retailers, Costco features the highest average shopper income at $125,000 a year. As well, Costco shoppers trend on the younger end of the spectrum, with the average shopper being under 40 years. In contrast, it’s not uncommon to find big-box retailers skew toward the older and less-compensated demographics.
Fundamentally, Costco fortuitously structures its business to help consumers mitigate inflation through bulk purchases. However, it may also perform (relatively) well during deflationary cycles. Again, the company’s ties to a wealthier demographic makes COST one of the S&P 500 stocks to buy.
Goldman Sachs (GS)
On paper, Goldman Sachs (NYSE:GS) presents an intriguing case for S&P 500 stocks to buy for investors anticipating more inflation. For one thing, the company offers a decent dividend yield of 3%. With so many public entities printing red ink, that dividend can go a long way for patient investors. Moreover, Goldman as a financial services provider may benefit from a profitability angle due to higher interest rates.
While these attributes may make GS relevant, it’s not the main reason why I put it on this list. Rather, Goldman’s wealth management arm could become a much more pertinent component of the overall business.
If you think about it, some of the wealthiest people in this country must be freaking out. Again, we lived through decades where the Fed more or less implemented dovish monetary policies. We’re now pivoting in the opposite direction, implying a long-term deflationary cycle ahead.
Growing wealth during deflation represents the ultimate badge of honor for market analysts. Since Goldman hires only the best, the company could be one of the more intriguing S&P 500 stocks to buy.
Crown Castle (CCI)
Just looking at the profile for Crown Castle (NYSE:CCI), it’s hard not to consider it one of the S&P 500 stocks to buy. No, it’s probably not going to make investors who get in now rich. But as a viable idea in the new normal, you can do a lot worse than Crown Castle.
Mainly, the company offers several enticing statistics. For instance, Crown Castle rates highly for growth. In particular, its three-year free cash flow growth rate stands at 23.5%, better than 84% of real-estate investment trusts (or REITs). As well, Crown rates highly for profitability. A key highlight is its return on equity, which at nearly 19% stands well above the industry median of 6.5%.
Notably, Gurufocus considers CCI stock “modestly undervalued.” At the same time, it’s best to keep things simple with Crown Castle. As the nation’s largest provider of shared communications infrastructure (cell towers, small cells, fiber), Crown holds a permanently relevant profile.
Waste Management (WM)
Arguably, a lesser-known fact about the recycling industry is that it’s largely a front-facing enterprise. In reality, the U.S. simply exported the problem elsewhere. According to NPR, for years, “America sold millions of tons of used yogurt cups, juice containers, shampoo bottles and other kinds of plastic trash to China to be recycled into new products.” As well, other countries joined in on the fun.
Now, China is saying enough. In addition, other developing nations that once housed American trash are putting an end to the practice. It all presents a conundrum for the U.S. and developed nations. What to do with all the garbage they generate?
It’s a perplexing problem but one that Waste Management (NYSE:WM) hopes to address. Fundamentally, the company runs a “dirty” business. But in some ways, it could be the most relevant of all. Given our wealth and generally rising prosperity — along with an influx of new people — consumption will only swing higher.
However, someone must deal with the repercussions of said consumption. Therefore, WM deserves consideration for one of the S&P 500 stocks to buy.
On the date of publication, Josh Enomoto 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.