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4 Safe Bets Amid Growing Concerns Over Delay in Rate Cuts
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Volatility returned to Wall Street in April and the start to May hasn’t been great, after a solid first quarter that saw all three major indexes hitting record highs. Rising inflation and slowing GDP have raised concerns over the economy’s future.
On May 1, the Federal Reserve left interest rates unchanged in its current range of 5.25-5.5%. Federal Reserve Chairman Jerome Powell also ruled out the chances of a rate hike in the coming months.
Rising inflation had raised fears that the Federal Reserve could consider hiking interest rates again. Notably, the Fed has kept interest rates steady since July 2023. Powell’s comments came as a respite to investors, sending stocks on a rally.
However, volatility soon returned to markets as Powell said that there has been little progress lately in bringing inflation down to its 2% target.
The S&P 500 and the Nasdaq ended in the red, although the Dow managed to finish in positive territory.
Powell ruled out another rate hike, but he also didn’t give any assurance on rate cuts. The Federal Reserve said in March that it still plans three rate cuts of 25 basis points each by the end of this year. However, the uncertainty over the timing of the first rate cut remains.
Inflation is once again climbing, with the consumer price index (CPI) increasing 3.5% in March on a year-over-year basis. Also, GDP grew at a modest pace of 1.6% in the first quarter.
With no sign of a rate cut anytime soon, higher interest rates could weigh on the broader economy. These fears could keep markets volatile for a longer period.
Our Choices
Given this situation, it would be wise to invest in defensive stocks like utilities and healthcare. 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.
ResMed Inc. holds a major position as designer, manufacturer as well as a distributor in the worldwide market for generators, masks and related accessories for the treatment of sleep-disordered breathing (“SDB”) and other respiratory disorders. RMD currently has two operating segments, which are the Sleep and Respiratory Care segment and Software-as-a-Service (SaaS) segment.
ResMedhas an expected earnings growth rate of 17.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.9% over the last 60 days. RMD presently sports a Zacks Rank #1. ResMedhas a beta of 0.64 and a current dividend yield of 0.89%.
Encompass Health Corporation is a provider of integrated healthcare services. EHC offers facility-based patient care through its network of inpatient rehabilitation hospitals. With a national footprint that includes 160 hospitals across 37 states and Puerto Rico, Encompass Healthdelivers high-quality, cost-effective, integrated care in the healthcare space.
Encompass Health has an expected earnings growth rate of 11.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.5% over the last 60 days. EHC currently has a Zacks Rank #2. Encompass Health has a beta of 0.64 and a current dividend yield of 0.92%.
New Jersey Resources Corporation is an energy services holding company that, through its subsidiaries, provides safe and reliable natural gas and clean energy services, including transportation, distribution, asset management and home services. NJR operates through four segments: Natural Gas Distribution, Clean Energy Ventures, Energy Services, and Storage and Transportation. outdoor comfort products.
New Jersey Resources has an expected earnings growth rate of 9.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.4% over the last 60 days. NJR presently carries a Zacks Rank #2. New Jersey Resourceshas a beta of 0.62 and a current dividend yield of 3.81%.
Global Water Resources, Inc. is a water resource management company. GWRS owns and operates regulated water, wastewater and recycled water utilities.
Global Water Resources has an expected earnings growth rate of 19.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.3% over the last 60 days. GWRS presently has a Zacks Rank #2. Global Water Resources has a beta of 0.98 and a current dividend yield of 2.41%.
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4 Safe Bets Amid Growing Concerns Over Delay in Rate Cuts
Volatility returned to Wall Street in April and the start to May hasn’t been great, after a solid first quarter that saw all three major indexes hitting record highs. Rising inflation and slowing GDP have raised concerns over the economy’s future.
On May 1, the Federal Reserve left interest rates unchanged in its current range of 5.25-5.5%. Federal Reserve Chairman Jerome Powell also ruled out the chances of a rate hike in the coming months.
Rising inflation had raised fears that the Federal Reserve could consider hiking interest rates again. Notably, the Fed has kept interest rates steady since July 2023. Powell’s comments came as a respite to investors, sending stocks on a rally.
However, volatility soon returned to markets as Powell said that there has been little progress lately in bringing inflation down to its 2% target.
The S&P 500 and the Nasdaq ended in the red, although the Dow managed to finish in positive territory.
Powell ruled out another rate hike, but he also didn’t give any assurance on rate cuts. The Federal Reserve said in March that it still plans three rate cuts of 25 basis points each by the end of this year. However, the uncertainty over the timing of the first rate cut remains.
Inflation is once again climbing, with the consumer price index (CPI) increasing 3.5% in March on a year-over-year basis. Also, GDP grew at a modest pace of 1.6% in the first quarter.
With no sign of a rate cut anytime soon, higher interest rates could weigh on the broader economy. These fears could keep markets volatile for a longer period.
Our Choices
Given this situation, it would be wise to invest in defensive stocks like utilities and healthcare. 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.
Four such stocks are ResMed Inc. (RMD - Free Report) , Encompass Health Corporation (EHC - Free Report) , New Jersey Resources Corporation (NJR - Free Report) and Global Water Resources, Inc. (GWRS - Free Report) .
ResMed Inc. holds a major position as designer, manufacturer as well as a distributor in the worldwide market for generators, masks and related accessories for the treatment of sleep-disordered breathing (“SDB”) and other respiratory disorders. RMD currently has two operating segments, which are the Sleep and Respiratory Care segment and Software-as-a-Service (SaaS) segment.
ResMedhas an expected earnings growth rate of 17.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.9% over the last 60 days. RMD presently sports a Zacks Rank #1. ResMedhas a beta of 0.64 and a current dividend yield of 0.89%.
Encompass Health Corporation is a provider of integrated healthcare services. EHC offers facility-based patient care through its network of inpatient rehabilitation hospitals. With a national footprint that includes 160 hospitals across 37 states and Puerto Rico, Encompass Healthdelivers high-quality, cost-effective, integrated care in the healthcare space.
Encompass Health has an expected earnings growth rate of 11.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.5% over the last 60 days. EHC currently has a Zacks Rank #2. Encompass Health has a beta of 0.64 and a current dividend yield of 0.92%.
New Jersey Resources Corporation is an energy services holding company that, through its subsidiaries, provides safe and reliable natural gas and clean energy services, including transportation, distribution, asset management and home services. NJR operates through four segments: Natural Gas Distribution, Clean Energy Ventures, Energy Services, and Storage and Transportation. outdoor comfort products.
New Jersey Resources has an expected earnings growth rate of 9.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.4% over the last 60 days. NJR presently carries a Zacks Rank #2. New Jersey Resourceshas a beta of 0.62 and a current dividend yield of 3.81%.
Global Water Resources, Inc. is a water resource management company. GWRS owns and operates regulated water, wastewater and recycled water utilities.
Global Water Resources has an expected earnings growth rate of 19.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.3% over the last 60 days. GWRS presently has a Zacks Rank #2. Global Water Resources has a beta of 0.98 and a current dividend yield of 2.41%.