Wall Street has remained volatile in October as multiple concerns continue to raise fears among investors. The Federal Reserve has not given a clear picture of its next course of action with its monetary tightening policies, while inflation once again increased in September as fresh geopolitical tensions have seen oil prices climb once again.

Given this scenario, investing in defensive sectors such as ALLETE, Inc. (ALE Quick QuoteALE - Free Report) , PNM Resources, Inc. , Consolidated Water Co. Ltd. (CWCO Quick QuoteCWCO - Free Report) , California Water Service Group (CWT Quick QuoteCWT - Free Report) and Vistra Corp. (VST Quick QuoteVST - Free Report) should be safe.

Inflation Increases Again

The Fed’s monetary tightening campaign that saw the central bank increase interest rates by 525 basis points since March 2022 resulted in inflation declining sharply over the past 15 months from its peak of 9.1% in June.

However, inflation increased marginally once again in September. The Bureau of Labor Statistics said that the consumer price index (CPI) rose 0.4% in September on a month-over-month basis, higher than economists’ expectations of a rise of 0.3%. Year over year, CPI increased 3.7% in September, unchanged from September.

Core CPI, which strips out volatile energy and food prices rose 0.3% month over month in September. 

Also, the producer price index (PPI) increased 0.5% month over month in September, higher than the consensus estimate of a rise of 0.3%. The increase in September inflation was primarily because of a rise in energy costs.

Rising energy costs have been weighing on investors’ sentiments as many believe that a further surge could slow the economy.  The fears got elevated last week following the surprise Hamas attack on Israel. The recent Israel-Hamas conflict, many believe, could impact the energy market, potentially leading to a short-term spike in crude oil prices.

Investors Still Confused

Investors are also unable to assess the Fed’s next interest rate hike move as the minutes of the Federal Reserve’s September FOMC, released last week, left them confused. The central bank officials are still uncertain about the future course of the economy as inflation remains elevated.

The minutes also indicated that due to the Federal Reserve's uncertainty about the nation's economy, officials have opted for a cautious, meeting-by-meeting approach to their interest rate hike policy.

Fed Chair Jerome Powell also said that at least one more interest rate hike of 25 basis points is required this year before cutting its projection for rate cuts in 2024 from four to two. This means higher interest rates are going to stay for a longer period than earlier expected.

The present situation has left investors scrambling for direction.

Our Choices

In order to secure one's portfolio, we have narrowed our search to five stocks from defensive sectors, such as utility. Also, these stocks 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. 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.

ALLETE, Inc. is an energy company. In addition to its electric utilities, Minnesota Power and Superior Water, Light and Power of Wisconsin, ALE owns ALLETE Clean Energy, based in Duluth, MN, U.S. Water Services headquartered in St. Michael, MN, BNI Energy in Center, ND, and has an 8% equity interest in the American Transmission Co.

ALLETE has an expected earnings growth rate of 8.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the last 60 days. ALE currently has a Zacks Rank #2. ALLETE has a beta of 0.73 and a current dividend yield of 5.04%.

PNM Resources, Inc., through its subsidiaries, is engaged in distributing energy and energy-related businesses in the United States. PNM operates through two segments — Public Service Company of New Mexico and Texas-New Mexico Power Company.

PNM Resources has an expected earnings growth rate of 1.1 for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 60 days. PNM presently has a Zacks Rank #2. PNM Resources has a beta of 0.41 and a current dividend yield of 3.36%.

Consolidated Water Co. Ltd., along with its subsidiaries, is involved in the development and operation of seawater desalination plants and water distribution systems in areas where naturally occurring supplies of potable water are scarce or nonexistent. CWCO also focuses on expanding operations in areas with a large proportion of tourist properties and a growing population.

Consolidated Water Co. has an expected earnings growth rate of 170.4% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 10.6% over the last 60 days. CWCO presently sports a Zacks Rank #1. Consolidated Water has a beta of 0.17 and a current dividend yield of 1.27%.

California Water Service Group is one of the largest investor-owned water utilities in the United States. CWT has six subsidiaries — California Water Service, Washington Water Service Company, New Mexico Water Service Company, Hawaii Water Service Company, CWS Utility Services and HWS Utility Services.

California Water Service Group has an expected earnings growth rate of 7.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last 60 days. CWT currently has a Zacks Rank #2. California Water Service Group has a beta of 0.45 and a current dividend yield of 2.17%.

Vistra Corp. is an energy company. VST offers electricity and power generation, distribution and transmission solutions. Vistra Energy Corp. is based in Dallas.

Vistra Corp has an expected earnings growth rate of 220.4% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 13.8% over the last 60 days. VST currently sports a Zacks Rank #1. Vistra Corp has a beta of 0.94 and a current dividend yield of 2.60%.