Markets often rally in anticipation of rate cuts but then decline when those cuts are implemented. J.P. Morgan’s trading desk recently warned that despite stocks setting “more than 20 all-time highs this year,” the Federal Reserve’s next rate cut threatens to curb investor zeal through a potential sell-the-news drop. Sure enough, as soon as the Federal Reserve cut the federal funds rate by 25 basis points, the market promptly sold off for the next three days. With the Nasdaq up more than 16% this year and the S&P 500 over 12% higher, on the back of two years of 20% gains, Gabriela Santos, the chief market strategist at J.P. Morgan’s asset management branch, stated that investors may want to “lower their expectations” regarding future returns. She also noted that, at 23 times earnings, the market is the most expensive in 20 years.
Echoing Santos’s comments, the J.P. Morgan Derivatives desk had this to say regarding the market:
As the market is trading at the highs post the Fed cut, we think it is prudent to take some chips off the table and consider hedges. With implied volatility at historical lows, one can replace upside exposure with a leveraged options structure to achieve asymmetric payouts if the market overshoots to the upside, while risking very little should a correction occur.
While complicated leveraged option hedging may not be the best idea for most investors, taking some profits on higher-beta names and shifting to a total return profile with dividend stocks offering high yields does make sense.
Why do we recommend J.P. Morgan stocks?
J.P. Morgan is one of the acknowledged leaders in the investment landscape on Wall Street and worldwide. The firm’s top-notch research department continues to provide institutional and high-net-worth clients with the best ideas across the investment spectrum and is likely to do so for years to come.
Energy Transfer
Energy Transfer L.P. (NYSE: ET | ET Price Prediction) is one of North America’s largest and most diversified midstream energy companies, offering a solid 7.50% dividend yield. This top master limited partnership is a safe option for investors seeking energy exposure and income, as the company pays a substantial distribution. Energy Transfer owns and operates one of the largest and most diversified portfolios of energy assets in the United States, with a strategic footprint in all the major domestic production basins.
The company is a publicly traded limited partnership with core operations that include:
- Complementary natural gas midstream, intrastate, and interstate transportation and storage assets
- Crude oil, natural gas liquids (NGL), and refined product transportation and terminalling assets
- NGL fractionation
- Various acquisition and marketing assets
Following the acquisition of Enable Partners in December 2021, Energy Transfer owns and operates over 114,000 miles of pipelines and related assets in 41 states, spanning all major U.S. producing regions and markets. This further solidifies its leadership position in the midstream sector.
Through its ownership of Energy Transfer Operating, formerly known as Energy Transfer Partners, the company also owns Lake Charles LNG Company, the general partner interests, the incentive distribution rights, and 28.5 million standard units of Sunoco L.P. (NYSE: SUN), and the public partner interests and 39.7 million standard units of USA Compression Partners L.P. (NYSE: USAC).
The J.P. Morgan price target is $23.
Entergy
Entergy Corp. (NYSE: ETR) is an energy company engaged primarily in electric power production and retail distribution operations in the Deep South of the United States. This top utility stock always makes sense for conservative investors and pays a rich 2.71% dividend. Together with its subsidiaries, Entergy produces and distributes electricity in the United States.
It operates in two segments. The Utility segment generates, transmits, distributes, and sells electric power in the City of New Orleans and portions of:
- Arkansas
- Louisiana
- Mississippi
- Texas
The company also distributes natural gas.
The Entergy Wholesale Commodities segment is involved in:
- The ownership, operation, and decommissioning of nuclear power plants located in the northern United States
- Sale of electric power to wholesale customers
- Provision of services to other nuclear power plant owners
- Ownership of interests in non-nuclear power plants that sell electric power to wholesale customers
The company generates electricity from various sources, including gas, nuclear, coal, hydro, and solar. It sells energy to retail power providers, utilities, electric power co-operatives, power trading organizations, and other power generation companies.
Its power plants have approximately 24,000 megawatts (MW) of electric generating capacity, which includes 5,000 MW of nuclear power.
The company delivers electricity to 3 million utility customers in Arkansas, Louisiana, Mississippi, and Texas.
The J.P. Morgan price target for the shares is $102.
Merck
Merck & Co. Inc. (NYSE: MRK) develops and produces medicines, vaccines, biological therapies, and animal health products. Merck is not just a healthcare company but a global force in the industry. This healthcare giant is a no-brainer down over 30% over the last year while paying a solid 3.97% dividend. The company operates through two segments.
The Pharmaceutical segment offers human health pharmaceutical products in:
- Oncology
- Hospital acute care
- Immunology
- Neuroscience
- Virology
- Cardiovascular
- Diabetes
- Vaccine products, such as preventive pediatric, adolescent, and adult vaccines
The Animal Health segment discovers, develops, manufactures, and markets veterinary pharmaceuticals, vaccines, health management solutions and services, as well as digitally connected identification, traceability, and monitoring products.
Merck serves:
- Drug wholesalers
- Retailers
- Hospitals
- Government agencies
- Managed healthcare providers, such as health maintenance organizations
- Pharmacy benefit managers and other institutions
- Physicians
- Physician distributors
- Veterinarians
- Animal producers
Merck’s growth is a result of its efforts and strategic collaborations. The company works with AstraZeneca, Bayer, Eisai, Ridgeback Biotherapeutics, and Gilead Sciences to jointly develop and commercialize long-acting treatments for HIV, demonstrating a commitment to innovation and growth.
The J.P. Morgan price objective is $120.
Mondelez
This consumer staples giant is always a safe bet when the going gets tough, especially with a 2.92% dividend yield. Mondelez International Inc. (NASDAQ: MDLZ) is a snack company. The company’s core business is the manufacture and sale of chocolate, biscuits, and baked snacks.
The company also has additional businesses in adjacent, locally relevant categories, including
- Gum and candy
- Cheese
- Grocery
- Powdered beverages
Its portfolio includes global and local brands such as Oreo, Ritz, LU, Clif Bar, and Tate’s Bake Shop biscuits and baked snacks, as well as Cadbury Dairy Milk, Milka, and Toblerone chocolate.
Mondelez segments include Latin America, AMEA, Europe, and North America. It sells its products in over 150 countries and has operations in approximately 80 countries, including 147 principal manufacturing and processing facilities across 46 countries.
The company sells its products to:
- Supermarket chains
- Wholesalers
- Supercenters
- Club stores
- Mass merchandisers
- Distributors
- Convenience stores
- Gasoline stations
- Drug stores
- Value stores
- Retail food outlets
The J.P. Morgan price target is set at $75.
W.P. Carey
W.P. Carey Inc. (NYSE: WPC) ranks among the largest net lease REITs with a well-diversified portfolio of high-quality, operationally critical commercial real estate. It pays a generous 5.27% dividend that investors will appreciate as interest rates decline. The W.P. Carey portfolio comprises approximately 1,600 net lease properties covering 178 million square feet, as well as 66 self-storage operating properties, as of June 30, 2025.
With offices in New York, London, Amsterdam, and Dallas, the company remains focused on investing primarily in single-tenant, industrial, warehouse, and retail properties in the U.S. and northern and western Europe under long-term net leases with built-in rent escalations.
J.P. Morgan has a $68 price target for the shares.
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