Wall Street's Stormy December To Continue: 5 Low-Beta Picks

Wall Street has suffered its worst start to December in 38 years. On Dec 17, U.S. stocks plunged on expectation of fourth rate hike by the Fed, fears about an impending global slowdown, surging U.S. dollar and plummeting crude oil prices.

At this juncture, it will be prudent to invest in in low-beta stocks with a favorable Zacks Rank to keep one’s portfolio safe from day-to-day market fluctuations.

Major Stock Indexes in Red

On Dec 17, the Dow retreated 507.53 points or 2.1% to close at 23,592.98, its lowest closing since Mar 23. In the previous two trading sessions, the blue-chip index lost more than 1,000 points. The S&P 500 fell 54.01 points or 2.1% to end at 2,545.94, its lowest closing since October 2017. The Nasdaq Composite dropped 156.93 points or 2.3% to finish at 6,753.73, its lowest closing since November 2017.

Moreover, all the major stock indexes are currently in the correction territory (fell below 10% from their recent high) and provided negative returns year to date. Each of these indexes is down nearly 7% over December.

Fed Likely to Hike Rate in December

The Federal Reserve is widely expected to hike its benchmark lending rate by 0.25% for the fourth time in December at its meeting on Dec 18 and 19. A rise in interest rate will raise the cost of funds and consequently investors may refrain from investing in equities and opt for bonds. Moreover, the Fed’s outlook about 2019 will be very crucial for the investors to form interest rate expectations.

Fears of Global Economic Slowdown

A series of weak economic reports, recently released in the United States, China several countries of the European Union have raised serious questions about an impending global economic slowdown. Most of the economists think lingering trade related conflicts with the United States is the primary reason behind slow pace of global economic growth.

On Dec 17, the New York Fed reported that the Empire State manufacturing index fell sharply from a metric of 23.3 in November to 10.9 in December, its lowest level in 19 months. Moreover, the National Association of Home Builders’ monthly confidence index plummeted 4 points to 56 in December, its lowest level since May 2015.

On Dec 14, National Bureau of Statistics of China reported that industrial output grew 5.4% year over year in November, its slowest pace in almost three years. Chinese retail sales rose 8.1% year over year in November, marking its weakest growth rate since 2003.

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Meanwhile, the European Central Bank (ECB) has lowered its growth forecast for the European Union (EU) for both 2018 and 2019. Notably, this is the second time in the past three months that the ECB has lowered growth forecast for the EU.

Our Top Picks

At this stage, investment in low-beta stocks will be fruitful. The beta is equal to 1 which means that the stock is as volatile as the market. So, a stock is relatively more volatile if it has beta greater than 1 and less volatile if beta is less than 1. However, picking winning stocks can be a difficult task.

This is where our VGM Score comes in handy, which helps us to select winners. We narrowed down our search on five stocks. Each of these stock have a Zacks Rank #1 (Strong Buy) and a VGM Score A. You can see Zacks Investment Research