Wall Street witnessed brutal trading in the last few months, with the major indices suffering the worst weekly fall in more than two years in the previous month. The Fed rates hike, and a trade war between the United States and China were the major culprits.
Global trade tensions are possible to threaten the stock market as talks between the two worlds largest economies are not going to unfold thus keeping the volatility alive. As a result, most investors' are still cautious about the negotiations that can resurface and what impact will it have on the stock market. Further, Washington turmoil and government tensions can still weigh down the stocks.
The earnings season is trying to overpower the trade tensions and the re-emerging geopolitical issues. There are a few major earnings in this week and the major tech stock has started to report better than expected results. Given the optimistic trends, here are some stock-picking concepts from the for investors that might prove very helpful within the current market scenario, reducing the danger of a downside.
Value stocks tend to outperform over the future and are less vulnerable to trending markets. These stocks have sturdy fundamentals - earnings, dividends, and income - that trade below their intrinsic value and are undervalued. These have the potential to generate higher returns and show lower volatility compared with their growth as they are trading at a discounted price currently.
Even though capitalization stocks were victims of the broad-market sale last week, they delay far better than the larger ones. This can be as a result of capitalization stocks have less international exposure and generate most of their revenues from the domestic market. These sawed-off stocks are less at risk of a trade war or the other political issue and will higher insulate investors from Trump's advocate stance. That is the reason why we have observed the recent surge in the small-cap stocks and its benchmark index RUSSELL 2000 hitting record high these days.
Quality stocks seek safety and protection against volatility. Quality stocks tend to beat out as these are wealthy in worth characteristics with healthy balance sheets, high come on capital, low volatility, elevated margins and a track of stable or rising sales and earnings growth. In short, a stock which has a good financial soundness overall can be considered as a quality stock.
Low Beta stocks:
Low-beta stocks generally exhibit larger levels of stability and tend to perform better during the correction phase of the market. Although these have lesser risks and lower returns, the stocks are thought-about safe and resilient. But again the selection of stocks depends upon the investor’s own risk-return appetite.
The dividend stocks provide a good passive income source and also a consistent income to the investors. Many companies that pay dividends and these stocks act as a barrier against economic risk and generally provide stability by offering payouts and yields on a regular basis.