Buy these 13 cheap stocks that will outperform in a recession-fuelled bear market, according to Morningstar

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  • The S&P 500 and Nasdaq have both plummeted over 20% this year as investors worry about a recession.
  • But pockets of the market now look significantly undervalued, according to Morningstar.
  • The research firm highlighted 13 stocks to buy because they will outperform in a bear market.

The S&P 500 and Nasdaq are both officially in


bear market

territory.

After delivering spectacular returns in 2021, the two indices have both slid over 20% year-to-date as institutional and retail investors fret that rising interest rates will trigger a recession.

But even a bear market creates investing opportunities, according to Morningstar. The investment firm recently identified 13 stocks that now look undervalued.

“It’s definitely been a tough year thus far for the market,” Morningstar’s chief US market strategist Dave Sekera said in a recent interview. “Having said that, I think the selling recently has become pretty indiscriminate, as even high-quality companies have been caught up in this most recent downdraft.”

Some investors are now focussing on timing the market bottom. Sekera warned that it’s difficult to predict when stocks will turnaround at this stage – but noted that signs that inflation is easing away from its 40-year high of 8.6% would likely spark a rally.

“Markets are waiting to get better clarity on a couple of different factors,” he said. “The most important will be when will inflation start to moderate, and when will we see some stabilization in the US economy.”

But in the meantime, investors should load up on high-quality stocks that could be trading at a significant discount, according to Sekera.

“These are just great opportunities for investors with a long-term focus,” he said. “With these stocks down as much as they are, that’s providing the ability for those that do have risk appetite in cash to put that to work in today’s market.”

Here are Morningstar’s 13 undervalued stocks to buy: