The market rout on Jul 19 is evidence for investors that the stock market can easily tumble when it trades close to record territory. Even though the stock market posted a two-day rally following Monday’s rout, it doesn’t necessarily mean that volatility among stocks has ended this summer. Investors need to be cautious, especially because the months of August and September are mostly negative for the stock market.
LPL Financial’s Chief Market Strategist, Ryan Detrick, also noted that the summer months are in fact ripe for a market pullback, particularly due to weak seasonality factors. Moreover, no one should ignore the impact of the COVID-19 delta variant. The more contagious variant of coronavirus already wreaked havoc on the stock market on Jul 19, and if the outbreak is not addressed quickly, it may dampen investor sentiments again.
Investors were spooked on Monday due to the rapid increase in coronavirus cases as the Delta variant is getting severe worldwide. No doubt, it led to the worst trading session for the Dow since the 943-point drop last October. However, the blue-chip index may yet again face such a selloff as the spread of the Delta variant continues to jeopardize economic recovery across the globe.
Needless to say, investors deep down fear another lockdown on businesses and movements if the spread of the variant is not contained. The Delta variant has already impacted highly vaccinated places like the U.K. and has affected places in the United States where vaccination rates are comparatively low.
Inflation, by the way, has already picked up, something that doesn’t bode well for the stock market. This is because inflation results in an increase in bond yields, thereby impacting the allure of growth stocks. To put things into perspective, the consumer price index (CPI) climbed 5.4% last month from the year-ago level, its highest 12-month increase since August 2008 when oil prices soared to $150, per the Labor Department, as cited in a MarketWatch article.
Similarly, June’s producer price index (PPI) came in hotter than expected. Citing a CNBC article, the PPI soared 7.3% in June on a year-over-year basis and moved up 1% from May. What’s more, majority of investors at the moment expecting inflation to increase in the near term. Citing another MarketWatch article, a recent survey by UBS Group showed that 57% of investors, particularly in the United States, believe inflation will increase in the next 12 months.
But despite inflationary pressure and the spread of the Delta variant expected to cause gyrations in the stock market, investors shouldn’t steer clear of equities. Instead, they should place their bets on solid dividend players. These stocks are unperturbed by market volatility, thanks to their sustainable business model and long track record of profitability.
We have, thus, highlighted four such stocks that have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and provide high yields.
Artisan Partners Asset Management Inc. APAM is an investment management firm focused on providing high-value added, active investment strategies to clients. The company has a Zacks Rank #2. It has a dividend yield of 7.2%, while its five-year average dividend yield is 8%. The company’s expected earnings growth rate for the current year is 47.5%.
Compass Diversified Holdings CODI was formed to acquire and manage a group of middle market businesses that are headquartered in North America. The company has a Zacks Rank #2. It has a dividend yield of 5.8%, while its five-year average dividend yield is 8.1%. The company’s expected earnings growth rate for the current year is 60.4%.
Redwood Trust, Inc. RWT is a self-advised and self-managed real estate investment trust. The company has a Zacks Rank #2. It has a dividend yield of 6.2%, while its five-year average dividend yield is 8.1%. The company’s expected earnings growth rate for the current year is 2,825%.
Plains Group Holdings, L.P. PAGP operates as a holding company. The company, through its subsidiaries, is involved in the transportation, storage, and marketing of crude oil and refined products. The company has a Zacks Rank #1. It has a dividend yield of 7%, while its five-year average dividend yield is 7.4%. The company’s expected earnings growth rate for the current year is 130.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.
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