The S&P 500 index has risen steadily this year with little volatility. But the broader market has now fallen two weeks in a row for the first time since May as economic uncertainties threaten to rock the boat. Two key risks…
Wall Street is focused on are Congress’ vote to raise the federal government’s debt ceiling and the looming collapse of China’s second-largest property developer.
American law places a limit on how much debt the government can take on, and to increase that amount, lawmakers must vote every few years. The current limit will likely be reached in October, and if lawmakers fail to raise the debt ceiling, the government could default on its debt. Though history suggests this is an unlikely outcome, there is uncertainty weighing on the market.
Overseas, an unfolding situation with China Evergrande Group threatens to bring instability to China’s market. The company can no longer afford to repay its debts of over $300 billion and investors are concerned that domino effects might cause Evergrande’s debt holders to collapse, too. So far, the crisis appears contained within China, insulating U.S. stocks from the potential fallout.
But over the long term, no crisis has ever permanently derailed the U.S. stock market. So it’s worth keeping an eye out for quality stocks you can pick up at a discount if the market does enter a correction period. In the event of a sell-off, here are two stocks I’d recommend buying hand over fist.
The case for Facebook
Facebook is already the most valuable social media company in the world — nine times larger than Snap and 20 times larger than Twitter. But now turning its ambitions toward developing a brand new medium it calls the metaverse, a virtual and augmented reality experience that could dwarf everything it has done so far.
According to CEO Mark Zuckerberg, the metaverse could become a digital society where humans can do in virtual spaces even more of the activities we do in everyday life. It could even sustain its own economy, and driving that economy could be an enormous opportunity for Facebook.
But Facebook is already growing quickly without a
metaverse business, and it’s a profit-generating machine. The stock trades at a reasonable price-to-earnings ratio of 25.7, while the tech-focused Nasdaq 100 index (of which Facebook is a component) carries a loftier P/E of 36.
If a stock market slide discounts Facebook further, it would definitely be worth picking up shares. Three to five years down the road, even the stock’s current price could look cheap in retrospect. And beyond that, the potential for Facebook to drive the next phase of social technology could lift its business significantly higher.
The case for Microsoft
With a valuation of $2.25 trillion, Microsoft (NASDAQ:MSFT) is the world’s second-largest public company by market cap, and that shouldn’t be much of a surprise since its Windows operating system and Office 365 software are used by billions of people.
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