The Federal Reserve raised its annual inflation outlook for the year to nearly 3% on Wednesday, while it left interest rates unchanged for the second consecutive time this year. Rising inflation and lack of clarity over President Donald Trump’s tariff proposals have made the Federal Reserve adopt a cautious approach.
Volatility returned to markets in late January and has since been rattling stocks as concerns over the economy’s health have grown over the past month.
Given the ongoing volatility and uncertainty over the next rate cut, it would be safe to invest in utilities and consumer staple stocks, which are considered defensive. In this regard, CMS Energy Corporation CMS, NiSource Inc. NI, CenterPoint Energy, Inc. CNP, Molson Coors Beverage Company TAP and Carriage Services, Inc. CSV from utility and consumer staples are spaces good picks. Each of these stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Moreover, the stocks are from the low-beta category (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.
Fed Leaves Interest Rates Unchanged
The Federal Reserve left its benchmark policy rate unchanged in the current range of 4.25-4.5% at the end of its two-day meeting on Wednesday. The decision was highly anticipated. However, stocks rallied after Federal Reserve Chairman Jerome Powell said that the central bank is still confident about two rate cuts this year despite concerns about tariff-driven inflation.
Inflation showed signs of cooling for the first time in February after advancing since December. The unexpected rise in inflation at the end of 2024 saw the Federal Reserve halt interest rate cuts for the first time since September.
The Fed has cut interest rates by 100 basis points since September. The halt in January was an indication that the central bank didn’t want to rush with rate cuts. Investors’ confidence was dented further after Trump announced his tariff plans toward the end of January.
Trump’s Tariffs a Concern for the Fed
Trump has announced hefty tariffs on several of the nation’s trading partners, which will go into effect as early as April 2. The President has announced 25% tariffs on all aluminum and steel imports from Canada. Also, 25% tariffs have been imposed on Mexico and 10% on China. Besides, Trump plans to slap hefty tariffs on the European Union and India.
Trump’s tariff proposals have reignited fears of a global trade war as these countries have also announced retaliatory tariffs. The Federal Reserve is concerned that this could drive up inflation and push the economy into a recession.
The Fed on Wednesday also lowered its forecast for gross domestic product (GDP)—which represents the total value of goods and services produced in the United States—for the remainder of the year. The forecast was lowered to 1.7% from 2.1% projected in December. Additionally, the central bank cautioned that the preferred inflation gauge is expected to reach 2.7% by the end of this year, up from the 2.5% projection made in December, both of which are significantly higher than the Fed’s 2% target.
5 Low-Beta Defensive Stocks With Upside
CMS Energy Corporation
CMS Energy Corporation is an energy company. CMS is the parent holding company of Consumers, an electric and gas utility, and NorthStar Clean Energy, a primarily domestic independent power producer and marketer.
CMS Energy Corporation has an expected earnings growth rate of 7.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days. CMS currently carries a Zacks Rank #2. CMS Energy Corporation has a beta of 0.35 and a current dividend yield of 2.95%.
NiSource Inc.
NiSource Inc., together with its subsidiaries, provides natural gas, electricity, and other products and services in the United States. NI’s operating subsidiaries deliver energy to roughly 3.7 million customers in six states — Ohio, Pennsylvania, Virginia, Kentucky, Maryland and Indiana. NiSource has one of the nation’s largest natural gas distribution networks, as measured by the number of customers.
NiSource has an expected earnings growth rate of 9.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.7% over the past 60 days. NI presently has a Zacks Rank #2. NiSource has a beta of 0.50 and a current dividend yield of 2.88%.
CenterPoint Energy, Inc.
CenterPoint Energy, Inc.is a domestic energy delivery company that provides electric transmission & distribution, natural gas distribution and competitive natural gas sales and services operations. CNP maintains the wires, poles and electric infrastructure serving more than 2.5 million metered customers in the greater Houston area and in southwestern Indiana.
CenterPoint Energy has an expected earnings growth rate of 8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 60 days. CNP currently has a Zacks Rank #2. CenterPoint Energy has a beta of 0.91 and a current dividend yield of 2.47%.
Molson Coors Beverage Company
Molson Coors Beverage Company, the global manufacturer and seller of beer and other beverage products, has an impressive diverse portfolio of owned and partner brands. TAP’s brands include global priority brands such as Blue Moon, Miller Lite, CoorsBanquet, Coors Light, Miller Genuine Draft and Staropramen, as well as regional champion brands like Carling and Molson Canadian.
Molson Coors Beverage Company’s expected earnings growth rate for the current year is 6.5%. The Zacks Consensus Estimate for current-year earnings has improved 6.7% over the past 60 days. TAP presently sports a Zacks Rank #1. Molson Coors has a beta of 0.81 and a current dividend yield of 3.19%.
Carriage Services
Carriage Services is a leading provider of death care services and products in the United States. CSV provides a complete range of services relating to funerals, burials and cremations, including the use of funeral homes and motor vehicles, the performance of cemetery interment services and the management and maintenance of cemetery grounds.
Carriage Services has an expected earnings growth rate of 21.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 13.8% over the past 60 days. CSV presently sports a Zacks Rank #1. Carriage Services has a beta of 0.91 and a current dividend yield of 1.17%.
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
