Markets rebounded last week but remain volatile as investors are still trying to gauge the Fed’s next move. On Aug 25, Fed Chairman Jerome Powell, at the Jackson Hole Annual Policy Symposium, delivered a balanced speech.

While he showed confidence in the economy, he also maintained his hawkish stance and said that inflation is still elevated and more interest rate hikes are required.

Powell added that economic growth has been stronger than expected as consumer spending has been robust. However, more interest rate hikes are required to pull down inflation to the Fed’s target level of 2%.

“The economy may not be cooling as expected. So far this year, GDP (gross domestic product) growth has come in above expectations and above its longer-run trend, and recent readings on consumer spending have been especially robust,” Powell said in his speech.

Markets ended higher following Powell’s comments, with the three major indexes — the Dow, the S&P 500 and the Nasdaq — gaining 0.7%, 0.7% and 0.9%, respectively.

However, Powell’s comments have left investors scrambling for direction as they are yet to get a clear picture of the Federal Reserve’s future course of action. A large section of the market participants still believe that the Fed will keep its interest rates unaltered in its September meeting.

However, many are also bracing for another interest rate hike in November when Fed officials meet again. The Fed has so far raised interest rates by 525 basis points, taking its benchmark rate to the range of 5.25-5.5%.

U.S. GDP grew 2.4% in second-quarter 2023 after rising 2% in the first quarter, the Bureau of Economic Analysis said. Inflation has declined sharply over the past year and has more than halved from its peak of 9.1% in June 2022.

However, the crisis is far from over, compelling Fed officials maintain their hawkish stance. More interest rate hikes will make the situation more difficult as it means higher borrowing costs.

Our Choices

In order to secure one’s portfolio, we have narrowed our search to five stocks from the defensive sectors such as consumer staples and utilities. Also, these stocks belong to the category of low-beta stocks (beta greater than 0 but less than 1). Hence, the recommended approach is to invest in low-beta stocks with a high dividend yield and a favorable Zacks Rank. Each of the stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy).

PNM Resources, Inc. PNM through its subsidiaries, is engaged in distributing energy and energy-related businesses in the United States. PNM operates through two segments — Public Service Company of New Mexico and Texas-New Mexico Power Company.

PNM Resources has an expected earnings growth rate of 1.1 for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 60 days. PNM presently has a Zacks Rank #2. PNM Resources has a beta of 0.41 and a current dividend yield of 3.3%.

Entergy Corporation ETR is primarily engaged in electric power production and retail distribution of power. ETR has 30,000 megawatt (MW) of generating capacity, including more than 8,000 MW of nuclear fuel capacity.

Entergy Corporation has an expected earnings growth rate of 4.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 60 days. ETR currently has a Zacks Rank #2. Entergy Corporation has a beta of 0.64 and a current dividend yield of 4.5%.

J&J Snack Foods Corp. JJSF is an American manufacturer, marketer and distributor of branded niche snack foods and frozen beverages for the food service and retail supermarket industries. Manufactured and distributed nationwide, JJSF’s principal products include SUPERPRETZEL, BAVARIAN BAKERY and other soft pretzels, ICEE and SLUSH PUPPIE frozen beverages, LUIGI’S, MINUTE MAID frozen juice bars and ices, WHOLE FRUIT sorbet and frozen fruit bars.

J&J Snack Foods’ expected earnings growth rate for the current year is 62.3%. The Zacks Consensus Estimate for current-year earnings has improved 16.4% over the past 60 days. JJSF currently carries a Zacks Rank #1. J&J Snack Foodshas a beta of 0.55 and a current dividend yield of 1.75%.

PepsiCo, Inc. PEP is one of the leading global food and beverage companies. PEP’s complementary brands/businesses include Frito-Lay snacks, Pepsi-Cola beverages, Gatorade sports drinks, Tropicana juices and Quaker foods. PepsiCo serves customers in more than 200 countries and territories.

PepsiCo has an expected earnings growth rate of 10.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.5% over the last 60 days. PEP currently has a Zacks Rank #2. PepsiCo has a beta of 0.52 and a current dividend yield of 2.82%.

Ingredion Incorporated INGR is an ingredients solutions provider specializing in nature-based sweeteners, starches and nutrition ingredients. INGR serves diverse sectors in food, beverage, brewing, pharmaceuticals and other industries.

Ingredion Incorporated’s expected earnings growth rate for the current year is 23.9%. The Zacks Consensus Estimate for the current-year earnings has improved 1.4% over the past 60 days. INGR presently carries a Zacks Rank #2. Ingredion has a beta of 0.78 and a current dividend yield of 2.76%.
Entergy Corporation (ETR): Free Stock Analysis Report

PepsiCo, Inc. (PEP): Free Stock Analysis Report

Ingredion Incorporated (INGR): Free Stock Analysis Report

PNM Resources, Inc. (PNM): Free Stock Analysis Report

J & J Snack Foods Corp. (JJSF): Free Stock Analysis Report

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