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Fretting Over Market Pullback as Election Nears? 5 Safe Picks

Market volatility is back to haunt the month of September and investors are likely to face more gyration in the upcoming weeks with the U.S. presidential election approaching. No matter what the outcome will be, market pundits believe the turbulence will rise. At the same time, a challenging environment for corporates amid the coronavirus pandemic and possibility of a delayed vote count due to mail-in-ballots have unnerved certain investors.
 
Some investors, in the meantime, expect the Cboe Volatility Index (VIX) to climb even further as the election nears, especially as some indicators show a tightening race. The VIX front-month October contract is around 25.80, while November futures that cover the period around election, are at 30.80. Notably, any reading above 20 indicates a bearish outlook for the equity market while one above 30 shows a high level of investor fear.
 
In fact, September’s volatility may be no match for the period post the presidential election. Wells Fargo Securities’ Michael Schumacher has categorically said that volatility is set to rise during the election period and beyond, especially following the results, and won’t recede anytime soon.
 
Needless to say, politics and markets go hand in hand for centuries. After all, politicians across the world have the power to make decisions which impact markets and industries at large. And it goes without saying that Presidents and parties get affected by the market’s performance during the election period. 
 
Nevertheless, among the various concerns for markets is how the build-up of positions in tech behemoths has increased risks, which in turn resulted in a turbulent week of trading on Sep 18. Tech giants, including Apple, Amazon and Google-parent Alphabet that helped the market make a strong comeback this year, abruptly lost momentum in September amid concerns of becoming too pricey.
 
The broader S&P 500 is now headed for its first monthly loss since March, while September maintains its reputation of being the worst for stocks. After all, since World War II, the S&P 500 on average has declined 0.5% in the month of September, according to CFRA research company. In fact, the Dow averaged a loss of 1% in September since 1937, while the Nasdaq, since its inception in 1971, averaged a loss of 0.5%, per Dow Jones Market Data.

Buy These 5 Ultra-Safe Stocks for Secure Returns

With September’s volatility being no match for what will come with the presidential election, it’s prudent to invest in stocks that provide risk-adjusted returns.
 
Such stocks are generally defensive players, or companies, whose business performance and sales are not highly correlated with activities in the larger market. Products of such companies, especially from the utilities and consumer staples sectors, are in constant demand irrespective of market volatility.
 
Utilities are deemed defensive stocks as electricity, gas and water are essentials. Food, beverage and tobacco companies are true defensive plays as demand for such stocks remains unaltered during market gyrations.
 
To top it, low-beta stocks are considered, which are inherently less volatile than the markets they trade in. In this case, a low beta ranges from 0 to 1. Further, they boast a Zacks Rank #1 (Strong Buy) or 2 (Buy).
 
MGE Energy Inc. MGEE is a public utility holding company. The company currently has a Zacks Rank #2 and a beta of 0.41. The Zacks Consensus Estimate for its current-year earnings has moved up 4.4% over the past 60 days. The company’s expected earnings growth rate for the current and next year is 4.4% and 8%, respectively.
 
MYR Group Inc. MYRG provides electrical construction services in the United States. The company currently has a Zacks Rank #2 and a beta of 0.84. The Zacks Consensus Estimate for its current-year earnings has risen 14.7% over the past 60 days. The company’s expected earnings growth rate for the current and next year is 24.3% and 12.5%, respectively.
 
Otter Tail Corporation OTTR engages in electric, manufacturing, and plastics businesses in the United States. The company currently has a Zacks Rank #2 and a beta of 0.32. The Zacks Consensus Estimate for its current-year earnings has climbed 4.7% over the past 60 days. The company’s expected earnings growth rate for the next quarter and year is 7.8% and 4.5%, respectively. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
 
The Hain Celestial Group, Inc. HAIN manufactures, markets, and sells organic and natural products in United States. The company currently has a Zacks Rank #1 and a beta of 0.75. The Zacks Consensus Estimate for its current-year earnings has advanced 12.9% over the past 60 days. The company’s expected earnings growth rate for the current and next year is 35.7% and 15.8%, respectively.
 
B&G Foods, Inc. BGS manufactures, sells, and distributes a portfolio of shelf-stable and frozen foods, and household products in the United States. The company currently has a Zacks Rank #2 and a beta of 0.36. The Zacks Consensus Estimate for its current-year earnings has moved 0.9% north over the past 60 days. The company’s expected earnings growth rate for the current year is 35.8%.

Zacks’ Single Best Pick to Double

From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
 
With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan. 
 
The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain.
 

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
The Hain Celestial Group, Inc. (HAIN): Free Stock Analysis Report
 
Otter Tail Corporation (OTTR): Free Stock Analysis Report
 
MYR Group, Inc. (MYRG): Free Stock Analysis Report
 
BG Foods, Inc. (BGS): Free Stock Analysis Report
 
MGE Energy Inc. (MGEE): Free Stock Analysis Report
 
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