BMO recommends these high-quality stocks for long-term investment and peace of mind.

Despite the market’s recovery from last week’s global downturn, BMO Capital Markets advises investors to consider certain stocks to safeguard against future uncertainties. This month has seen significant market fluctuations, but encouraging economic indicators have helped regain last week’s losses. Following the release of July’s consumer price index report on Wednesday, which indicated the slowest inflation rate since March 2021, all three major indexes saw slight gains. This followed a day after unexpectedly low wholesale inflation data also boosted stocks. BMO Capital Markets remains optimistic about U.S. stocks, projecting an S&P 500 target of 5,600 for 2024, with a bullish scenario of 6,000. However, they caution that investors should brace for increased volatility as they assess the economic outlook and the Federal Reserve’s policy responses. The CBOE Volatility Index, a key measure of market anxiety, has shown significant fluctuations, dropping below 18 on Wednesday, its lowest since August 1, but spiking above 65 during the August 5 sell-off.

BMO has identified high-quality S&P 500 stocks with low earnings per share volatility, substantial cash reserves, and strong return on equity, which tend to perform well during both volatile and strong market periods. Among these stocks is Alphabet, which has seen its shares rise over 15% this year. BMO rates it as outperform, and the tech giant enjoys broad support from Wall Street, with 45 out of 55 analysts recommending a buy or strong buy, according to FactSet. However, Alphabet faces potential challenges, as a Bloomberg News report on Wednesday suggested that the Department of Justice is considering breaking up the company, causing its shares to drop by more than 2%.

Kroger also made BMO’s list, though analysts have mixed opinions about the grocer. Of the 22 analysts covering Kroger, half rate it as a strong buy or buy, 10 recommend holding, and one rates it as underperform. The company has faced criticism for implementing electronic shelf labeling technology, which could facilitate price increases during high demand. Kroger’s shares have declined by over 4% in the past three months but are up more than 15% year-to-date.

Cummins, a high-quality industrial stock, has seen its shares rise by about 25% in 2024. Morgan Stanley recently highlighted it as a top pick, citing potential earnings growth driven by strong demand in the data center sector.