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Is S&P 500 Due for a Major Pullback? These 3 Ultra-Safe Stocks Don't Care

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Sreoshi Bera
·6 min read
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Stocks have been on a rollercoaster ride so far in 2020. The prevalent COVID-19 pandemic halted businesses globally and locked people indoors for months following government-imposed stay-at-home orders to stem the spread of the deadly virus. This apart, the US presidential elections and trade tiffs impacted the economy. Now that we are stepping into the New Year, rather a new decade, investors are hopeful that vaccination programs and the new presidential regime will bear good news for the broader market. But there are certain factors that indicate otherwise. Despite the pandemic-led slump, the S&P 500 Index has managed to add around 15% year to date but is the index due for a major pullback in 2021?

The coronavirus outbreak not only affected people’s lifestyles but also changed the investment landscape in 2020. Significantly, the economy will continue to witness its effects in the upcoming year. Businesses are still adapting to the “new normal” environment, which altered the pattern of work, education, shopping, travelling and nearly every other daily activity. This definitely helped the technology sector rally to new highs but airline and cruise companies plus other travel-related or consumer focused stocks saw a steep decline.  In fact, business travel may not be resumed anytime soon.

As we head for 2021 with multiple COVID-19 vaccines in line, we are missing out on major issues that we may encounter in the upcoming year pertaining to vaccine production, logistics and the supply chain.

In order to create herd immunity from the lethal virus by vaccinating enough people, production needs to be ramped up. Emergence of new variants of the coronavirus already forced countries in Europe to shut borders and tighten restrictions. As these new strains are found to spread faster, vaccine production is a tall order for now.

Closure of stores, restaurants and several other businesses amid the pandemic worsened the unemployment scenario in 2020.The labor market witnessed persistent weakness and the weekly claims of joblessness in December scaled back to September levels. Record rise in new coronavirus cases and hospitalizations prompted restaurants and several other businesses to down the shutters or lay off staff.

Another factor that may drag the broader market is the transition of the new presidential administration. The Federal Reserve cut the interest rate thrice in 2020, bringing it to a near-zero level. Alongside this, a significant stimulus package kept the economy afloat. However, as president-elect Joe Biden takes on the mantle from the outgoing President Donald Trump on Jan 20, 2021, there are chances that the Congress and the new regime may disagree on the size of the future coronavirus relief package. Hence, a gridlock in passing a new stimulus bill could make it difficult for the Fed to continue providing a cushion to the economy.

3 Ultra-Safe Stocks to Buy

The coronavirus pandemic is expected to prevail in 2021 too, impacting the markets as investors remain unsure of the economy’s health and its capability to rebound. Even as news from multiple pharma giants raises hopes and lift stocks for a day or two, a long-term rally is doubtful until majority of the population is immunized. Also, uncertainties abound around a fresh stimulus package from the government’s end and this may keep markets volatile in 2021 as well.

In light of the current crisis and other negatives that may pop up in 2021, we shortlisted three ultra-safe stocks that are expected to farewell, irrespective of any downturn in the upcoming year. These three stocks are less unpredictable in nature than the market since they have a low beta (between 0 and 1) and are dividend payers, which are indicative of their sound businesses, bullish growth forecasts for 2021 and a top-ranked status, presently sporting a Zacks Rank #1 (Strong Buy) or 2 (Buy).

B&G Foods, Inc. BGS manufactures, sells and distributes a portfolio of shelf-stable and frozen foods, and household products. This company belongs to the Zacks Food - Miscellaneous industry and has an expected earnings growth rate of 2.6%for next year. The Zacks Consensus Estimate for the company’s 2021 earnings has been revised 19.9% upward over the past 60 days.B&G Foods flaunts a Zacks Rank #1, is a 0.51 beta stock and pays 6.30% dividend to shareholders. You can see the complete list of today’s Zacks #1 Ranks tocks here

In the upcoming year, B&G Foods may continue to observe an uptrend as stockpiling and higher at-home consumption boost sales. Additionally, e-commerce sales and its impressive brand portfolio will continue to accelerate the growth pace. (Read More)

Extra Space Storage Inc. EXR is a self-administered and self-managed REIT. This company that belongs to the Zacks REIT and Equity Trust - Other industry has an expected earnings growth rate of 5.5% for next year. The Zacks Consensus Estimate for the company’s 2021 earnings has moved 6.3% north over the past 60 days. Extra Space is a 0.15 beta stock that carries a Zacks Rank #2 and pays 3.16% dividend to investors. 

Geographical expansions are a key to the company's success over the past year. In 2020, the company added 10 operating stores, five certificate of occupancy stores and 121 stores to its third-party management platform. If the pandemic continues to take a toll in 2021, there will be innumerable foreclosures of stores and businesses that could lead to higher demand as people relocate or downsize.

Portland General Electric Company POR is an integrated electric utility company that engages in generation, wholesale purchase, transmission, distribution and the retail sale of electricity. It belongs to the Zacks Utility - Electric Power industry and has an expected earnings growth rate of 6.5% for 2021. The Zacks Consensus Estimate for the company’s next-year earnings has been raised 1.9% over the past 60 days.

Portland General Electric is a 0.25 beta stock that carries a Zacks Rank of 2 and pays 3.91% dividend to stakeholder. The company aims at using clean energy to reduce greenhouse gas emissions associated with the power supplied to its customers

Zacks Top 10 Stocks for 2021

In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2021?

These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Start Your Access to the New Zacks Top 10 Stocks >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Portland General Electric Company (POR) : Free Stock Analysis Report
 
Extra Space Storage Inc (EXR) : Free Stock Analysis Report
 
B&G Foods, Inc. (BGS) : Free Stock Analysis Report
 
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