Markets have been volatile since the beginning of this month following a solid July. The volatility continued last week as concerns grew over the Fed’s future course of action related to its interest rate hike.

Market participants are worried that the Fed could continue with its interest rate hikes as officials maintained their hawkish stance despite inflation showing a steady decline over the past year.

The volatility could even escalate as inflation, although marginally, increased in July, giving the Fed an option to continue with its rate hikes. It would thus be wise to invest in defensive stocks like utilities with a favorable Zacks Rank that are likely to strengthen one’s portfolio.

Rate Hike Fears Grow Again

Stocks have been scrambling for direction as investors are unable to gauge the Fed’s future course of action with its interest rate hike campaign. The Dow, the S&P 500 and the Nasdaq ended last week down 2.2%, 2.1% and 2.6%, respectively.

The Nasdaq has now fallen 7.2% in the past three weeks, its steepest decline since late December, while the S&P 500 has lost 4.6%, its worst three-week decline since the week ending Mar 10.

Investors’ sentiments were further dented as Fed officials maintained their hawkish stance. Most Fed officials in the July meeting said, “further tightening of monetary policy” is required to ease inflationary pressure.

The Bureau of Labor Statistics said that the consumer price index increased 3.2% year over year in July from 3% in July.  Although the headline inflation rate has more than halved from its peak of 9.1% in June 2022, the slight rise in July could make the Fed continue with the monetary tightening campaign.

Moreover, despite the sharp decline, inflation remains elevated and is still a lot higher than the Federal Reserve’s target of 2%. And as consumer spending remains steady and constant, the prices of essential commodities are well-poised to increase.

Fears of more interest rate hikes among investors have led to a decline in stock-market indexes. This is due to the fact that higher interest rates affect the cost of borrowing, limit consumer expenditures, and hinder overall economic expansion.

Our Choices

Investors should thus focus on stocks that offer risk-adjusted returns like J&J Snack Foods Corp. (JJSF Quick QuoteJJSF - Free Report) , MGP Ingredients, Inc. (MGPI Quick QuoteMGPI - Free Report) , Ingredion Incorporated (INGR Quick QuoteINGR - Free Report) and Celsius Holdings, Inc. (CELH Quick QuoteCELH - Free Report) .

These stocks belong to the consumer staples sector that is non-cyclical in nature, which means their businesses are not largely influenced by market fluctuations.

J&J Snack Foods Corp. is an American manufacturer, marketer and distributor of branded niche snack foods and frozen beverages for the food service and retail supermarket industries. Manufactured and distributed nationwide, JJSF’s principal products include SUPERPRETZEL, BAVARIAN BAKERY and other soft pretzels, ICEE and SLUSH PUPPIE frozen beverages, LUIGI'S, MINUTE MAID frozen juice bars and ices, WHOLE FRUIT sorbet and frozen fruit bars.

J&J Snack Foods’ expected earnings growth rate for the current year is 62.3%. The Zacks Consensus Estimate for current-year earnings has improved 16.4% over the past 60 days. JJSF currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

MGP Ingredients, Inc. produces and markets ingredients and distillery products to the packaged goods industry. MGPI’s Distillery Products segment primarily offers food-grade alcohol, fuel-grade alcohol and distillers feed. The company's Ingredient Solutions segment primarily provides specialty wheat starches and proteins, commodity wheat starches, and commodity vital wheat gluten.

MGP Ingredients’ expected earnings growth rate for the current year is 10.4%. The Zacks Consensus Estimate for current-year earnings has improved 5.2% over the past 60 days. MGPI currently sports a Zacks Rank #1.

Ingredion Incorporated is an ingredients solutions provider specializing in nature-based sweeteners, starches and nutrition ingredients. INGR serves diverse sectors in food, beverage, brewing, pharmaceuticals and other industries.

Ingredion Incorporated has an expected earnings growth rate of 23.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.4% over the last 60 days. INGR presently has a Zacks Rank #2 (Buy).

Celsius Holdings, Inc. specializes in commercializing healthier, nutritional functional foods, beverages and dietary supplements. CELH markets Celsius, the calorie burner, through its wholly-owned operating subsidiary, Celsius, Inc. Celsius Holdings sells its products through grocery, drug, convenience, club and mass, and health and fitness channels.

Celsius Holdings has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 26.6% over the last 60 days. CELH presently carries a Zacks Rank #2.