The latest decision by the Federal Reserve to hold rates steady is not doing any favors to the stock market overall. The decision to do nothing is stoking fears of a recession, sending broad market indices lower in the process. That said, tech continues to lead the way, and the relative safety of the Dow is coming into sharper focus. As I write this, the Nasdaq Composite is down 2.3%, with the Dow falling by a relatively modest 1.2%.
That’s a continuation of recent trends that have seen investors trim their positions across the tech sector in favor of safety. Renewed recessionary fears suggest investors will continue to head in that direction and seek the relative safety of the Dow.
In turn, share prices should rise on increasing demand. That raises the question of which moves investors should make as the pivot into greater relative safety continues.
Coca-Cola (KO)
Coca-Cola (NYSE:KO) is considered to be a defensive stock and is rising as I write this. The stock has gained over 7% in the last 20 days and remains under its consensus target price. Part of the recent price surge is due to the aforementioned pivot but also Coca-Cola’s sponsorship of the Paris Olympics.
Coca-Cola’s CEO noted that the company recently upped its guidance, which could surprise some. He noted that while the low-end consumer in both the United States and China continues to come under pressure due to inflation and other factors, pricing for premium products has more than made up for the shortfall.
Analysts continue to rally behind Coca-Cola following a recent earnings beat in which better-than-expected margins outpaced the negative effects of higher SG&A expenses. Coca-Cola continues to prove it is an earnings machine capable of operating in just about any environment, and it is likely to see increasing demand in the coming weeks for just that reason.
McDonald’s (MCD)
It’s a great time to consider moving more heavily into McDonald’s (NYSE:MCD) stock. It’s certainly a contrarian position, given McDonald’s second-quarter sales fell for the first time in almost four years.
McDonald’s has been hard hit by inflation. The company raised prices, and consumers fought back, opting to avoid the golden arches at rates not seen for years. McDonald’s has responded by reintroducing value meals and remains a value leader in the consciousness of many.
That said, second-quarter earnings came in at $2.97, well below the $3.07 expected on Wall Street. McDonald’s blamed the weakness on increasing prices throughout its supply chain, among other factors. Regardless, that poor performance has sent McDonald’s shares much lower, and they now are flirting with low target price territory.
In my mind, that creates the opportunity to establish a position or increase it. Investors will continue to receive dividends and we’ll have to wait and see how effective McDonald’s turnaround strategy will be.
Apple (AAPL)
Apple (NASDAQ:AAPL) has been playing catch-up in relation to artificial intelligence (AI). It is a relative laggard amongst the tech giants when it comes to AI. The company only recently revealed its plans for its AI services known as Apple Intelligence at the June Worldwide Developers Conference (WWDC). Although it was far later to the game than its competition, that sent stock prices higher.
They have recently stumbled due to the greater tech sell-off.
Then, on August 1, Apple released its third-quarter earnings report. That report showed the company is essentially flat, with a slight bump in sales over the last three and nine months, respectively.
iPhone sales are down slightly in each of those periods, which is of paramount importance to Apple.
The iPhone 16 is slated to be released in September. It remains to be seen whether AI functionality will be included in the release. Regardless, Apple could see a spike in sales, especially given the expectation of rate cuts at the same time.
On the date of publication, Alex Sirois 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.