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Large single-day declines have been rare this year, as the S&P 500 has only slipped by 2% or more in three sessions in 2024, according to BMO Capital Markets. But the firm's strategists say a pullback shouldn't be surprising.
In a typical year, stocks have historically fallen by 10%, BMO noted, and they only receded 8.5% from their peak last month. That suggests the market may be overdue for a drawdown.
"We never like when investors lose money, but at the same time, we are not totally surprised by the latest weakness given the lack of a meaningful pullback YTD," wrote Brian Belski, the chief investment strategist at BMO, in a September 4 note.
Although history seems to be against US stocks -- based on both their recent September showings and their tendency to suffer a 10% correction -- that's not the full story.
When the S&P 500 rises as much as it has this year through eight months, it has built on its gains in the last third of the year without exception, according to BMO data since 1990. The market has lost ground in September in two of those four scenarios, so a loss this month wouldn't be unprecedented, though it isn't guaranteed either.
Besides, bull markets usually last at least five years, and Belski noted that this long-term uptrend isn't even in its third year. Returns in the middle of a bull market tend to be softer, but BMO is still optimistic about the S&P 500's chances to build on its year-to-date gains.
"We continue to view periods of weakness as dip-buying opportunities," Belski wrote.
Investors who follow BMO's advice should consider the 15 stocks on the firm's US large-cap list, which beat the S&P 500 by 2.2% last month and has topped the index by over 2% in 2024. The list also has a strong track record, as it has trounced the broader market since 2008.
Below are those 15 companies listed alphabetically, along with the ticker, market capitalization, price-to-earnings (P/E) ratio, and sector for each.