My ISA is ready for an S&P 500 bear market
While UK investors were enjoying Easter Monday yesterday (21 April), the S&P 500 closed down 2.36%. The market was rattled when President Trump sent some less-than-festive words to Federal Reserve Chair Jerome Powell, calling him a “major loser” for not cutting interest rates.
Reports say that the administration is looking into ways to remove Powell. As no president has removed a Fed Chair before, more uncertainty is being stirred up for stock investors.
Choppy waters
The S&P 500 has now fallen 16% since mid-February. The way things are going, 20% now looks like a distinct possibility. This would put the index into bear market territory — the first time since 2022.
Nearly half of my Stocks and Shares ISA portfolio in terms of value is made up of S&P 500 stocks. These include Visa, Nvidia, Intuitive Surgical (NASDAQ: ISRG), Uber Technologies, Axon Enterprise, and CrowdStrike.
I’m happy with the quality and resilience of these companies. They all have very strong competitive positions, ranging from digital payments (Visa) and AI chips (Nvidia) to cybersecurity (CrowdStrike) and taxis (Uber).
While a potential recession would knock consumer and business confidence alike, people will still be paying for things via their credit and debit cards and taking taxis. Meanwhile, businesses cannot afford to scrap cybersecurity, especially when hacking incidents are on the rise.
This is important because when a bear market strikes and stocks are falling, I want to have confidence that those in my ISA will likely bounce back when things start improving. And improve they will, as history shows that the S&P 500 has eventually recovered from every previous bear market.
In contrast, if my ISA was stacked with speculative stocks and firms with dubious business models, I would worry about permanent losses. That would make things much more stressful.
Investing during the storm
Recently, I have been buying a small handful of stocks that suddenly fell 25%+. My ISA still has a bit of cash left in it to carry on doing so over the next few weeks.
One stock from the list above that I’ve been waiting to add to for ages is Intuitive Surgical. Through its Da Vinci surgical systems, the company is a global leader in robotic-assisted surgery.
There are around 10,000 Da Vinci machines in hospitals worldwide, and last year surgeons carried out nearly 2.7m procedures with them. Once they are installed and professionals are trained, there are very high switching costs, giving Intuitive a wide moat.
However, there are a couple of specific threats hanging over the firm right now. One is rising competition from medical device giants Medtronic and Johnson & Johnson. Both are hoping to muscle their way into the lucrative robotic surgery space.
Another uncertainty is tariffs, with much of the firm’s manufacturing done in Mexico.
Intuitive’s share price has dipped 23% in three months. However, the forward price-to-earnings ratio here is around 58. That’s about in line with its five-year average but a big premium to the S&P 500 (20). This tells me the stock is not yet on sale.
As it happens, the robotics pioneer reports its Q1 2025 results today. I’ll see what management says and how the stock responds in the next few days before taking another look.
The post My ISA is ready for an S&P 500 bear market appeared first on The Motley Fool UK.
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Ben McPoland has positions in Axon Enterprise, CrowdStrike, Intuitive Surgical, Nvidia, Uber Technologies, and Visa. The Motley Fool UK has recommended Axon Enterprise, CrowdStrike, Intuitive Surgical, Nvidia, Uber Technologies, and Visa. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
