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4 Safe Stocks to Buy as Wall Street Braces for a Fall

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It’s been undoubtedly a terrific year for the stock market. Bolstered by an array of fiscal and monetary stimulus measures and a mostly receding health crisis, the economy has started to recover and stocks have begun to rally.

The S&P 500, for instance, has climbed 20% so far this year and registered seven successive months of gains, citing a MarketWatch article. The broader index, in fact, had hit more than 50 record highs along the way this year. What’s more, such a stellar run for the stock market has followed last year’s 68% bounce back from the March 2020 lows, added the MarketWatch article.

But things may not look all hunky-dory for the stock market from now onward. This is because, traditionally, the month of September hasn’t been good for the stock market. The S&P 500’s return for the month of September has been a negative 0.99% dating back to 1928, as mentioned in a Barron’s article.

It means September is even worse than the notorious March, when the index historically recorded an average loss of 0.11%, added the Barron’s article. By the way, the Dow has seen a loss of 0.8% during the month of September since 1950, per the Stock Trader’s Almanac, quoting an Investopedia article.

To make matters worse, a series of headwinds threatens to slow down the pace of the stock market’s upward momentum in the near term. In other words, investors should brace for a volatile stock market. This is because stimulus boosts have peaked, while corporate earnings growth for the rest of the year is now widely expected to decelerate, all of which don’t bode well for the stock market.

Likewise, the Fed’s indication to taper its asset purchases probably in the coming quarters coupled with President Biden’s proposal to hike corporate as well as personal taxes won’t support the stock market’s upward journey.

The Fed, in particular, pumped money into the financial system amid the coronavirus pandemic to help the economy stay afloat. The central bank kept its federal funds rate at 0% to 0.25% and has been purchasing $120 billion a month of mortgage-backed securities since March 2020 to counter any economic downturn. This in turn gave investors the confidence to consider risky assets like stocks. However, Fed Chair Jerome Powell recently said that the central bank may wind down its bond-buying program, a move that could turn out to be a dampener for all kinds of risky assets, including stocks.

Similarly, a possible hike in corporate taxes by the government could easily decrease the collective S&P 500 companies’ earnings per share by 5% and even stocks could witness a correction, as mentioned in the Barron’s article.

But in spite of such issues, investors shouldn’t ignore equities totally. Instead, it’s now prudent to invest in stocks that are perceived to be less risky and at the same time are poised to yield better returns in the near future. Thus, stocks that have a low beta and pay out dividends, indicating financial strength, are suitable investment bets right now.

Also, the stocks should be from non-cyclical sectors or whose activities aren’t dependent on the performance of the broader market. In other words, these stocks that belong to the utility and consumer staples sectors are unperturbed by market gyrations. We have, thus, selected four such stocks that boast a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Atmos Energy Corporation (ATO - Free Report) is engaged in regulated natural gas distribution and storage business. The company has a beta of 0.4 and a Zacks Rank #2. It has a dividend yield of 2.6%, while its five-year average dividend yield is 2.2%. The Zacks Consensus Estimate for its current-year earnings has moved up 0.4% over the past 60 days. The company’s expected earnings growth rate for the current year is 7.8%.

Otter Tail Corporation’s (OTTR - Free Report) primary business is the production, transmission, distribution and sale of electric energy. The company has a beta of 0.4 and a Zacks Rank #1. It has a dividend yield of 2.8%, while its five-year average dividend yield is 3.1%. The Zacks Consensus Estimate for its current-year earnings has moved up 39.2% over the past 60 days. The company’s expected earnings growth rate for the current year is 51.7%.

American States Water Company (AWR - Free Report) along with its subsidiaries provides fresh water, wastewater services and electricity to customers in the United States. The company has a beta of 0.04 and a Zacks Rank #2. It has a dividend yield of 1.6%, while its five-year average dividend yield is 1.8%. The Zacks Consensus Estimate for its current-year earnings has moved up 0.4% over the past 60 days. The company’s expected earnings growth rate for the current year is 6.4%.

J & J Snack Foods Corp. (JJSF - Free Report) is an American manufacturer, marketer, and distributor of branded niche snack foods and frozen beverages for the food service and retail supermarket industries. The company has a beta of 0.58 and a Zacks Rank #1. It has a dividend yield of 1.6%, while its five-year average dividend yield is 1.4%. The Zacks Consensus Estimate for its current-year earnings has moved up 32.9% over the past 60 days. The company’s expected earnings growth rate for the current year is 183.8%.