5 Defensive Stocks to Counter Volatility as Post-Election Rally Halts

Ritujay Ghosh

Fri, Nov 15, 2024, 11:00 AM 5 min read

The Dow recorded its best post-election day rally in more than 128 years, while the S&P 500 and the Nasdaq hit individual all-time highs. The rally has continued into this week, with the Dow and the S&P 500 surpassing 44,000 and 6,000 points, respectively, for the first time on Monday. However, volatility has returned following a jump in inflation and other macroeconomic factors.

Given this situation, it would be wise to invest in defensive stocks like utilities and consumer staples such as Avangrid, Inc. AGR, Atmos Energy Corporation ATO, DTE Energy Company DTE, The Clorox Company CLX and Ingredion Incorporated INGR. Each of the stocks has a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Also, these belong to the category of low-beta stocks (beta greater than 0 but less than 1). Hence, the recommended approach is to invest in low-beta stocks with a high-dividend yield and a favorable Zacks Rank.

Wall Street Rally Halts

On Thursday, the Dow fell 0.5%, while the S&P 500 and Nasdaq each shed 0.6%, retreating from their earlier highs as fresh data showed inflation rose in October. The producer price index (PPI) reading showed a month-over-month rise of 0.2% in October and 2.4% year over year.

Core PPI, which excludes the volatile food and energy costs, rose 0.3% sequentially in October and 3.1% from the year-ago levels. The consumer price index (CPI) reading, released a day earlier, showed a 0.2% month-over-month rise in October, while it grew 2.6% year over year.

The Federal Reserve cut interest rates by 50 basis points for the first time in more than four years in September on signs of slowing inflation. This led to a pre-election rally, which was further fueled by a 25-basis point rate cut a day after the election results were declared.

However, the latest inflation data has once again raised concerns among investors as it is still higher than the Federal Reserve’s 2% target.

Investors Reassessing Fed’s Comments

On Thursday, Federal Reserve Chairman Jerome Powell said that the central bank need not be “in a hurry” to cut rates. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully,” Powell said.

Investors, too, are worried that the Federal Reserve may not go for another rate cut in December given the underlying strength in the economy. Also, the number and pace of rate cuts in 2025 could be slower than expected earlier.

Markets are pricing in a 62.6% chance of a 25-basis-point rate cut in December, which was 82.5% just a day earlier, according to the CME FedWatch tool.

5 Low-Beta Defensive Stocks With Growth Potential

Avangrid, Inc.

Avangrid, Inc. is the third-largest solar and wind generator in the United States, with $44 billion of assets. AGR operates via two primary businesses, namely Avangrid Networks and Avangrid Renewables.

Avangrid has an expected earnings growth rate of 12% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.5% over the last 60 days. AGR presently carries a Zacks Rank #2. Avangrid has a beta of 0.55 and a current dividend yield of 4.91%.