With stocks on track for one of their worst years in recent history, top firms on Wall Street say investors should look for defensive stocks with stable margins and cash flow that should be able to weather a bear market.
There are still opportunities in the consumer, healthcare and energy sectors.
According to the minutes from the central bank's latest policy meeting, Fed officials indicated that they are prepared to continue aggressively hiking interest rates to combat inflation, and analysts at Evercore ISI argued that several bank stocks are set to benefit from rising rates.
Wells Fargo, First Republic Bank, and KeyCorp are all of which have more upside potential as rates rise, with balance sheet growth from loans and deposits, and less downside credit risk than peers.
The recent shift in consumer spending from goods to services should make casual dining stocks a good bet for investors who want to bet on resilience.
While the inflationary outlook remains worrisome, restaurant chains won't see sales take too much of a hit and should still benefit from solid consumer spending, according to the firm.
Morgan Stanley chief U.S. equity strategist Mike Wilson predicted a further market selloff due to rising recession risks, but he did identify several high-quality companies that can potentially weather this bear market.
Exxon Mobil, Coca-Cola, Deere & Co., Abbott Laboratories and CVS Health are some of the defensive stock picks that should achieve growth at a reasonable price.
High inflation and slowing economic growth are likely to persist, even though markets have not yet priced it in, warned strategists at UBS. The bank recommends investors look at stocks with steady margins to weather the effects of deflation, including consumer stocks such as Kroger, eBay, and Microsoft.
Inflationary pressures and the prospect of rising rates have weighed on investor sentiment. The S&P 500 has lost seven weeks in a row and is currently 15% below its January highs. The latest Fed minutes show that there is a growing consensus about the need for tighter monetary policy, with most central bank officials agreeing that it would be necessary to raise interest rates by half a percentage point at the upcoming meetings in June and July.
How long does it take for stocks to recover from bear markets?
Retail stocks rebound, but the shift in consumer spending may continue.
The central bank will raise rates aggressively.
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