Wall Street is reeling under volatility ever since the trade negotiation between the United States and China snapped in early May. Although, the three major stock indexes -- the Dow, the S&P 500 and the Nasdaq Composite -- are still in the positive territory with double-digit returns, the momentum that we saw in the first four months of this year is currently lost. Moreover, a less than-expected dovish stance adopted by the Fed added to the woes.
At this juncture, it will be prudent to invest in low-beta stocks with a favorable Zacks Rank to keep one’s portfolio safe from day-to-day market fluctuations. The beta is equal to 1, which means that the stock is as volatile as the market. So, a stock is relatively more volatile if it has beta greater than 1 and less volatile if beta is less than 1.
Wall Street Facing Severe Volatility
The table below will show how volatility has gripped U.S. stock markets in the past three months.
|Return||Dow 30||S&P 500||Nasdaq|
Despite, providing handsome returns year to date, major indexes are suffering losses in the last three months, except for a small gain of the Dow. Furthermore, the U.S. economy, which is going through its historically longest expansion period, has also slowed down, fearing the risk of an impending recession if trade-related tussle continues to heighten.
No End to U.S.-China Trade Conflict
On Aug 1, stock markets were shaken by President Donald Trump’s tweet that the U.S. government will impose 10% tariff on a new set of Chinse goods worth $300 billion effective Sep 1. Trump further said that the tariff rate could go up to 25% later if required.
Trade-related dispute between the United States and China is one and half years old. The United Sates has already levied 25% tariff on $250 billion Chinese exports while China has reciprocated with 25% tariff on $110 billion U.S. goods.
Trade talks, which broke down in May, restarted in July, and last week high-level delegates of two countries met in Beijing for the first time since the two presidents met in the G-20 summit on May 31. The meeting was termed constructive by both sides. Despite these developments, after Trump’s tweet on Aug 1, there is a dark cloud on the future of the U.S.-China trade deal.
Weak Economic Data
On Aug 1, the Institute of Supply Management (ISM) reported that the U.S. manufacturing index for the month of July slipped to 51.2% from 51.7% in June. It was the fourth straight monthly decline in the index and lowest reading since August 2016. Notably, the manufacturing sector constitutes nearly 12% of the U.S. GDP.
The ISM also reported that U.S. construction spending fell 1.3% in June, its biggest decline in seven months. Notably, investment in private construction projects plunged to its lowest level in nearly one and half years.
On Aug 5, the ISM reported that U.S. non-manufacturing (services) index dropped to 53.7% in July from 55.1% in June. Notably, the new orders index fell to 54.1% in July, reflecting the lowest level since August 2016.
Our Top Picks
We have narrowed down our search to five stocks each carries a Zacks Rank #1 (Strong Buy) and a VGM Score of A, which helps us to find the winners. You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows price performance of our five picks year to date.
FTI Consulting Inc. FCN provides business advisory services to manage change, mitigate risk, and resolve disputes worldwide. It has a beta of 0.27. The company has expected earnings growth of 35.5% for the current year. The Zacks Consensus Estimate for the current year has improved by 27.8% over the last 30 days.
Great Lakes Dredge & Dock Corp. GLDD provides dredging services in the United States and internationally. It has a beta of 0.62. The company has expected earnings growth of 323.5% for the current year. The Zacks Consensus Estimate for the current year has improved by 5.9% over the last 30 days.
TiVo Corp. TIVO provides media and entertainment products for the consumer entertainment industry worldwide. It operates in two segments, Product and Intellectual Property Licensing. TiVo has a beta of 0.20. The company has expected earnings growth of 10.7% for the current year. The Zacks Consensus Estimate for the current year has improved by 12.2% over the last 30 days.
Materion Corp. MTRN manufactures and sells advanced engineered materials used in consumer electronics, industrial components, defense, medical, automotive electronics, telecommunications infrastructure, energy, commercial aerospace, science, services and appliance markets worldwide. It has a beta of 0.89. The company has expected earnings growth of 38.2% for the current year. The Zacks Consensus Estimate for the current year has improved by 6.1% over the last 30 days.
JetBlue Airways Corp. JBLU is a low-fare, low-cost passenger airline, which provides high-quality customer service primarily on point-to-point routes. It has a beta of 0.90. The company has expected earnings growth of 29% for the current year. The Zacks Consensus Estimate for the current year has improved by 3.6% over the last 30 days.
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