The market might witness a sell-off if Congress fails to meet the deadline for raising the debt limit. With market volatility likely to remain elevated in the near term, fundamentally sound value stocks Hitachi (OTC:HTHIY), Honda Motor (HMC), Penske (PAG), and Konica Minolta (KNCAY) could outperform into year-end.Lawmakers are facing a deadline of fewer than three weeks to raise the debt limit. The failure may lead to a default, with a subsequent broad market sell-off and economic downturn. When the country was on the brink of such an outcome is 2011, the S&P 500 declined more than 18%. In addition, companies are raising prices or are intending to do so soon, as input prices are rising due to continued supply chain bottlenecks.
Historically, value stocks have performed better than growth stocks in the face of market volatility and increasing prices. The SPDR Portfolio S&P 500 Value ETF (SPYV) has gained 31.2% over the past year, outperforming the SPDR Portfolio S&P 500 Growth ETF’s (SPYG) 29.2% returns.
Thus, it could be wise to invest in fundamentally strong stocks Hitachi, Ltd. (HTHIY), Honda Motor Co., Ltd. (HMC), Penske Automotive Group, Inc. (NYSE:PAG), and Konica Minolta, Inc. (KNCAY) that look undervalued at their current price levels.