U.S. equity market volatility could be here for a while owing to fresh developments on the global macroeconomic front that threaten to induce more unpredictability in stock performances. May’s Brexit vote defeat, the longest ever U.S. government shutdown and uncertainty over Sino-U.S. trade talks are some of the prime factors influencing markets at present.
In such a gloomy scenario, defensive stocks could be your best bet to fight market turbulence and offset losses.
May’s Brexit Deal Defeat Could Mar U.S. Equities
U.K. Prime Minister Theresa May’s proposed Brexit deal defeat this week has resulted in more political uncertainty in the United Kingdom. Possibilities are high for the U.K. to leave the European Union with no deal on Mar 29 or a renegotiation where May could exercise some concessions from Europe.
But until a decision is reached, investor confusion over the proceedings is likely to take a toll on global stock markets. U.S. equities could bear the brunt of the uncertainty as well, as foreign-listed U.S. stocks may come under fire.
U.S. Government Shutdown Marks Day 25
The partial U.S. government shutdown that began on Dec 22 is resulting in more economic damage than anticipated earlier, the White House acknowledged on Jan 15.
According to the Council of Economic Advisers’ revised estimates, the shutdown’s effect has started to show up in the U.S. economy and could ultimately push it into a state of contraction, a New York Times report cited. President Donald Trump’s prolonged standoff with Democrats over $5.7 billion for a border wall could restrict U.S. economic growth unless resolved soon.
Kevin Hassett, the chairman of the Council of Economic Advisers, noted that the shutdown might lower expectations of growth permanently if the equity markets and businesses anticipate Trump and the Congress to repeat such action again.
No Immediate Resolution to Trade Dispute
Although positive investor sentiment around U.S.-China trade talks last week helped U.S. equities rally, both economies could still be far from reaching a trade resolution in the near future.
According to Senator Chuck Grassley, United States Trade Representative Robert Lighthizer witnessed no progress in trade talks that were meant to settle the continuing trade dispute.
Per a CNBC report, Grassley told reporters at a conference call, “there hasn't been any progress made on structural changes that need to be made.” He added, “Let's say that would include intellectual property, stealing trade secrets, putting pressure on corporations to share information with the Chinese government and industries.”
Given the delay in an affirmative deal despite the talks, it could be an indication that it might be a while before a favorable deal surfaces that may be profitable for American businesses.
Why Invest in Defensive Stocks Now
Defensive stocks could be good investments at the moment given the political uncertainty in the United Kingdom and other macroeconomic headwinds that could affect the U.S. equity markets in the near future.
Defensive stocks always tend to be in demand since they comprise necessary products and services. Consumer staples consist of items such as food and beverages, household products etc. Pharmaceuticals and medical services are in demand no matter what economic conditions affect equity markets. Therefore, these two sectors can be ideal investments at present.
4 Defensive Stocks to Buy
We have hand-picked four defensive stocks that you could consider adding to your portfolio.
Newell Brands Inc. NWL is a global manufacturer and distributor of consumer and commercial products. The company carries a Zacks Rank #1 (Strong Buy) and the Zacks Consensus Estimate for the current year has advanced 0.6% over the past 30 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Tupperware Brands Corporation TUP is a manufacturer and seller of design-centric products for home and kitchen. The company carries a Zacks Rank #2 (Buy) and the Zacks Consensus Estimate for the current year has advanced 2% over the past 30 days.
Ionis Pharmaceuticals, Inc. IONS is a developer of RNA-targeted therapeutics. The company carries a Zacks Rank #1 and the Zacks Consensus Estimate for the current year has advanced 3.2% over the past 30 days.
Neurocrine Biosciences, Inc. NBIX is a developer of pharmaceuticals for treating endocrine and neurological-related diseases and disorders. The company carries a Zacks Rank #2 and the Zacks Consensus Estimate for the current year has advanced 0.6% over the past 30 days.
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