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Volatility has returned to Wall Street as discouraging economic data released over the past month has raised concerns over a delay in rate cuts. Stocks took a hit on Apr 25 after data showed that the U.S. economy grew at a modest pace of 1.6% in the first quarter, the slowest in almost two years.
Also, GDP growth was a lot lower than the 2.2% consensus estimate and 3.4% recorded in the final quarter of 2023. Consumer spending has been slowing lately, decelerating economic growth. Besides, a large number of businesses are reducing their inventories, which is holding economic growth.
Inflation has declined sharply from its peak of 9.1% in June 2022 after the Federal Reserve adopted an aggressive monetary tightening policy and hiked interest rates by 525 basis points since March 2022.
Slowing inflation raised hopes that the Federal Reserve would end its monetary tightening campaign and start rate cuts. The Federal Reserve also echoed similar sentiments and hinted at multiple rate cuts this year.
However, inflation, after falling below 3% in the final month of 2023, has resumed its climb this year. The consumer price index (CPI) rose 3.5% in March, raising fears that the Federal Reserve could delay its planned rate cuts.
The enthusiasm surrounding rate cuts has faded drastically since the beginning of the year. Fears of a slowing economy and a delay in rate cuts could keep markets volatile for a longer period.
Our Picks
Given this situation, it would be wise to invest in defensive stocks like utilities. Five such stocks are Atmos Energy Corporation (ATO - Free Report) , American Water Works Company, Inc. (AWK - Free Report) , National Grid plc (NGG - Free Report) , California Water Service Group (CWT - Free Report) and Eversource Energy (ES - Free Report) .
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.
Atmos Energy Corporation, along with its subsidiaries, is engaged in the regulated natural gas distribution and storage business. ATO serves nearly 3.4 million customers in more than 1,400 communities in eight states, from the Blue Ridge Mountains in the East to the Rocky Mountains in the West. Atmos Energyoperates more than 72,000 miles of transmission and distribution lines as well as 5,700 miles of interstate pipelines.
Atmos Energy has an expected earnings growth rate of 8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days. ATO presently has a Zacks Rank #2. Atmos Energy has a beta of 0.66 and a current dividend yield of 2.75%.
American Water Works Company, Inc. provides essential water services to over 14 million customers in 24 states and has an employee strength of 6,500. AWK also acquires small water service providers to expand its customer base.
American Water Works Company has an expected earnings growth rate of 6.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the last 60 days. AWK presently carries a Zacks Rank #2. American Water Works has a beta of 0.63 and a current dividend yield of 2.34%.
National Grid plc is an international energy delivery business, whose principal activities are in the regulated electricity and gas industries. In the United States, National Grid is one of the top 10 electricity companies, with the largest electricity transmission and distribution network in the New England/New York region. NGG owns and operates the high-voltage electricity transmission network in England and Wales, and Britain's natural gas transportation system.
National Grid has an expected earnings growth rate of 24.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.3% over the last 60 days. NGG presently sports a Zacks Rank #1. National Grid has a beta of 0.64 and a current dividend yield of 3.56%.
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 184.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 15.1% over the last 60 days. CWT currently carries a Zacks Rank #1. California Water Service Group has a beta of 0.49 and a current dividend yield of 2.34%.
Eversource Energy engages in the energy delivery business. ES transmits and delivers electricity and natural gas to residential, commercial and industrial customers in Connecticut, New Hampshire and Massachusetts. Eversource Energy’s revenues from the sale are primarily derived from residential, commercial and industrial customers and are not dependent on any single customer.
Eversource Energy has an expected earnings growth rate of 3.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 60 days. ES presently has a Zacks Rank #2. Eversource Energy has a beta of 0.58 and a current dividend yield of 4.81%.
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Economic Growth Slows Triggering Slowdown Fears: 5 Safe Bets
Volatility has returned to Wall Street as discouraging economic data released over the past month has raised concerns over a delay in rate cuts. Stocks took a hit on Apr 25 after data showed that the U.S. economy grew at a modest pace of 1.6% in the first quarter, the slowest in almost two years.
Also, GDP growth was a lot lower than the 2.2% consensus estimate and 3.4% recorded in the final quarter of 2023. Consumer spending has been slowing lately, decelerating economic growth. Besides, a large number of businesses are reducing their inventories, which is holding economic growth.
Inflation has declined sharply from its peak of 9.1% in June 2022 after the Federal Reserve adopted an aggressive monetary tightening policy and hiked interest rates by 525 basis points since March 2022.
Slowing inflation raised hopes that the Federal Reserve would end its monetary tightening campaign and start rate cuts. The Federal Reserve also echoed similar sentiments and hinted at multiple rate cuts this year.
However, inflation, after falling below 3% in the final month of 2023, has resumed its climb this year. The consumer price index (CPI) rose 3.5% in March, raising fears that the Federal Reserve could delay its planned rate cuts.
The enthusiasm surrounding rate cuts has faded drastically since the beginning of the year. Fears of a slowing economy and a delay in rate cuts could keep markets volatile for a longer period.
Our Picks
Given this situation, it would be wise to invest in defensive stocks like utilities. Five such stocks are Atmos Energy Corporation (ATO - Free Report) , American Water Works Company, Inc. (AWK - Free Report) , National Grid plc (NGG - Free Report) , California Water Service Group (CWT - Free Report) and Eversource Energy (ES - Free Report) .
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.
Atmos Energy Corporation, along with its subsidiaries, is engaged in the regulated natural gas distribution and storage business. ATO serves nearly 3.4 million customers in more than 1,400 communities in eight states, from the Blue Ridge Mountains in the East to the Rocky Mountains in the West. Atmos Energyoperates more than 72,000 miles of transmission and distribution lines as well as 5,700 miles of interstate pipelines.
Atmos Energy has an expected earnings growth rate of 8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days. ATO presently has a Zacks Rank #2. Atmos Energy has a beta of 0.66 and a current dividend yield of 2.75%.
American Water Works Company, Inc. provides essential water services to over 14 million customers in 24 states and has an employee strength of 6,500. AWK also acquires small water service providers to expand its customer base.
American Water Works Company has an expected earnings growth rate of 6.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the last 60 days. AWK presently carries a Zacks Rank #2. American Water Works has a beta of 0.63 and a current dividend yield of 2.34%.
National Grid plc is an international energy delivery business, whose principal activities are in the regulated electricity and gas industries. In the United States, National Grid is one of the top 10 electricity companies, with the largest electricity transmission and distribution network in the New England/New York region. NGG owns and operates the high-voltage electricity transmission network in England and Wales, and Britain's natural gas transportation system.
National Grid has an expected earnings growth rate of 24.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.3% over the last 60 days. NGG presently sports a Zacks Rank #1. National Grid has a beta of 0.64 and a current dividend yield of 3.56%.
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 184.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 15.1% over the last 60 days. CWT currently carries a Zacks Rank #1. California Water Service Group has a beta of 0.49 and a current dividend yield of 2.34%.
Eversource Energy engages in the energy delivery business. ES transmits and delivers electricity and natural gas to residential, commercial and industrial customers in Connecticut, New Hampshire and Massachusetts. Eversource Energy’s revenues from the sale are primarily derived from residential, commercial and industrial customers and are not dependent on any single customer.
Eversource Energy has an expected earnings growth rate of 3.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 60 days. ES presently has a Zacks Rank #2. Eversource Energy has a beta of 0.58 and a current dividend yield of 4.81%.