Trump's Impeachment Looms Large Over Markets: 5 Safe Picks

U.S. stocks took a beating after House Speaker Nancy Pelosi launched an impeachment inquiry into President Trump. This followed reports that Trump sought foreign help to damage the reputation of a political rival. The President has been accused of having withheld economic aid to Ukraine in order to build pressure on officials at Kiev to come up with disturbing information about Democratic presidential candidate Joe Biden. Lest we forget, Biden’s son Hunter Biden has business dealings with Ukraine.

Meanwhile, we have seen markets behave differently during major impeachments in the recent past. For instance, during the Nixon saga, stocks were hit but that was also because the economy was headed into a recession. On the other hand, markets moved north despite Bill Clinton’s impeachment, thanks to a sturdy economy.

This clears one thing, the stock market is largely affected by the current state of the economy apart from the impeachment threat. Downbeat consumer confidence data plays a major role here.

The ebb and flow of U.S.-China trade tensions have dented investors’ sentiment to a large extent. The trade tussle is widely expected to take a toll on manufacturing and farming as well as threaten the record U.S. economic expansion. According to the Conference Board, the consumer confidence index dropped to a three-month low of 125.1 this month from 134.2 in August. Consumers aren’t feeling confident about their present condition, while the so-called expectations index fell to 95.8 from 106.4, the lowest reading since January.

The trade war has undoubtedly affected the global economy as well. The Fed did try to lend support to the domestic economy by trimming key benchmark rates, but business leaders believe that things won’t improve unless the countries in disagreement make serious efforts to tamp down tensions through constructive deals.

Talking about trade, Trump recently accused China of manipulating its currency and stealing intellectual property, in a U.N. speech. And now we all can gauge where trade negotiations are headed, and what the fate of equities will be in the near future. To add to the bearish sentiments, any impeachment proceedings may affect Trump’s re-election bid, making way for a less business-friendly Democratic administration.

How to Prepare for the Slump?

Given the aforesaid factors, it seems like the Wall Street is in for trouble. During times like this, investors should ideally focus on low-risk assets that are protected by a combination of parameters for better returns. The best way to go about this is by picking low-beta stocks, which are inherently less volatile than the markets they trade in. In this case, a low beta ranges from 0 to 1.

These stocks are also dividend payers which boast immense financial strength and are immune to market vagaries.

5 Ultra-Safe Picks

We have, thus, selected five such stocks that boast a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Arbor Realty Trust, Inc. (NYSE:ABR) invests in a diversified portfolio of structured finance assets in the multifamily and commercial real estate markets. The company has a Zacks Rank #1 and a beta of 0.61. The company has a dividend yield of 8.9%, while its five-year average dividend yield is 8.61%. The Zacks Consensus Estimate for its current-year earnings has risen 8.1% in the last 60 days. The company is expected to return 9.9% this year compared with the Zacks Investment Research

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Written By: Zacks Investment Research