Wells Fargo analysts say it’s time to move away from the 25 stocks in the “re-opening portfolio” that benefited as the economy recovered after Covid, with companies such as Darden Restaurants and Bath & Body Works in the group. Downgraded to fast neutral. , In their place, Wells is now highlighting a batch of defensive names like Verizon, McDonald’s and Coca-Cola, whose prices are less volatile and will benefit when the next recession hits. If history is any guide, the stock in Wells Fargo’s proposed “bearish portfolio” will probably grow in importance and become a bigger and bigger part of the S&P 500, the bank says. While the weighting of the S&P 500’s more defensive sectors in industries such as utilities, pharmaceuticals, consumer staples and low-volatility stocks “has bounced off their recent lows, history suggests there is still material room for further growth”. Analysts led by Christopher Harvey wrote Tuesday. Wells Fargo’s base case now calls for an economically hard landing as hawkish Federal Reserve monetary policy and risk-averse investors combine to propel the economy into recession. Stocks will only “find a bottom when the market believes the Fed hike will begin to ease.” In this environment, Wells’ recommended strategy is to screen for long views, finding the five stocks with the lowest price volatility in each of the S&P 500’s 11 industry sectors, and placing each of them in a model portfolio with a return of 1.8%. Equal weighting is to be given. , The list below shows a stock Wells with the largest market capitalization among low-volatility names in each of the 11 S&P 500 sectors.
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