5 Low-Beta Stocks To Buy To Counter Severe Market Volatility
Zacks Investment Research | Feb 26, 2020 07:14AM ET
Wall Street has been grappling with volatility over the last four trading days as a result of the coronavirus outbreak taking the shape of a global pandemic. The deadly virus has so far infected 82,000 people and claimed lives of 2,700 in China. Notably, 36 countries have reported coronavirus cases so far. In fact, Italy, South Korea, Japan and Iran have been impacted severely and are on high alert.
In the United States, the Centers for Disease Control and Prevention has warned that Americans of the possibility of virus-led disruptions. It has also called for preparedness should the need arise, although the current threat remains low. Following the news, investors went into overdrive fearing global economic slowdown.
Wall Street Plunges
In the first two days of trading of this week, the Dow has shed 6.59%, marking its worst 2-day drop for the index since February 2018. The S&P 500 tumbled 6.28% — highlighting the worst decline for two consecutive days since August 2015. Likewise, the Nasdaq Composite declined 6.38% — the worst decline for two successive days since June 2016.
For the last five trading days — the Dow, the S&P 500 and the Nasdaq Composite — declined 7.4%, 7.2% and 7.9%, respectively. Year to date, all three indexes have entered the negative category with a loss of 5.1%, 3.2% and 0.1%, respectively.
In the past two days of trading, the S&P 500 has lost market value worth $1.737 trillion. In each of the first two trading days of this week, all 30 stocks of the Dow lost value while all 11 sectors of the S&P 500 lost value.
Meanwhile, the Dow is 8.4% away from its all-time high recorded in Feb. 12. The S&P 500 and the Nasdaq Composite are 7.6% and 8.6% away, respectively, from their all-time highs recorded on Feb 19. A decline of 10% or more from their latest highs will place these indexes in the correction mode.
Volatility Indexes Spike
Severe volatility has gripped U.S. stock markets in the last four trading sessions. On Fed 25, The CBOE VIX — which reflects S&P 500 option bets to calculate expectations for volatility over the coming 30 days — jumped 11.3% to close at 27.85. This was the volatility index’s highest close in 14 months.
During the intraday trading, the VIX recorded a new 52-week high at 30.25. The volatility index climbed 63% in the first two trading days of this week. Notably, the VIX is popularly recognized as Wall Street’s best fear gauge.
However, the VIX had declined to below 12 late November 2019 and was hovering around 12 to 13 until late January 2020. Moreover, CNN Money’s Fear & Greed Index, which reached 96 out of 100 in January, plunged to 29 on Feb 24.
Our Top Picks
Get The News You Want
U.S. stock markets are likely to remain choppy in the near term barring optimistic news regarding the outbreak or some major economic data. At this juncture, it will be prudent to invest in low-beta (beta value less than 1 but greater than zero) stocks as these stocks will be less volatile than the broader market.
However, the selection process may be difficult. This is where our Zacks Investment Research
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.