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- The S&P 500 has seesawed after a disastrous start to August.
- Investors should expect more volatility, according to Bank of America.
- Here are 42 high-quality, stable stocks to buy during this stressful stretch.
Bank of America's top US equity strategist is staying calm even though the market isn't.
US stocks are coming off the largest volatility surge since the onset of the pandemic, but BofA strategists led by Savita Subramanian believe calls for a crash are misplaced.
"A full-fledged bear market (i.e., 20%+ drop) is unlikely: just 50% of the signposts that historically preceded S&P 500 peaks have been triggered vs. an average of 70% ahead of prior market peaks," Subramanian, who's BofA's head of US equity strategy, wrote in a recent note.
The S&P 500 has fallen as much as 8.5% from its mid-July peak, which caught many investors flat-footed after an excellent six-and-a-half-month stretch to start the year.
However, Subramanian noted that such a pullback isn't out of the ordinary. A typical year contains a 10% correction and three separate 5% selloffs, based on BofA data since 1930.
Bank of America
"Larger corrections are less frequent but still common, with 10%+ corrections occurring once a year on average (the last one was in fall 2023), 15%+ corrections occurring once every two years on average, and 20%+ corrections (i.e., bear markets) occurring once every 3-4 years on average," Subramanian wrote.
With that in mind, US stocks were "effectively due" for a drawdown, Subramanian wrote. So when July's jobs report disappointed and the Federal Reserve declined to cut interest rates while Japan's central bank hiked, investors fled for the exits, causing volatility to spike.
42 stable stocks to buy in a wild market
Even after the early-August market meltdown, Bank of America strategists are sticking with their year-end S&P 500 price target of 5,400, which is roughly 3.4% above where the index is trading.
But although the US economic expansion will likely continue, Subramanian wrote that investors should brace for continued volatility — especially in an election year.
Bank of America
The CBOE Volatility Index, or VIX, is well off its historic highs from earlier this week but remains elevated, and its current level signals that the S&P 500 will move 1.8% per day going forward.
In this turbulent backdrop, Subramanian urged clients to take a cautious approach — especially with the mega-cap technology stocks getting crushed in this selloff, given that their earnings growth is slowing while firms outside of the Magnificent Seven are seeing their profits surge.
Instead, the lead strategist recommends shifting toward stocks that others may view as boring. That includes large, value-oriented companies; dividend payers; firms that will benefit from capital expenditures unrelated to artificial intelligence; and high-quality stocks.
"The highest-quality stocks tend to outperform as the VIX rises while the lowest-quality stocks tend to lag the most," Subramanian wrote.
To that point, Bank of America shared a list of stocks designed to help investors "sleep at night." These companies all have buy ratings from BofA; are stable relative to the broader market, as measured by their five-year beta; are high quality, according to S&P Global; and have upside since they're underrepresented in long-only funds.
Below are the 42 stocks that fit that description listed in alphabetical order, along with the ticker, market capitalization, sector, industry, five-year beta, S&P quality rating, and relative weight in long-only funds for each. All have a five-year beta at or below 1 and a B+ quality rating or better.
Markets Insider
Ticker: AFL
Market cap: $55.5B
Sector and industry: Financials; Insurance
Five-year beta: 0.95
S&P quality rating: A
Long-only relative weight: 0.02
Source: Bank of America
Markets Insider
Ticker: APD
Market cap: $62B
Sector and industry: Materials; Chemicals
Five-year beta: 0.82
S&P quality rating: A
Long-only relative weight: 0.83
Source: Bank of America
Markets Insider
Ticker: AKAM
Market cap: $14.1B
Sector and industry: Information Technology; IT Services
Five-year beta: 0.67
S&P quality rating: B+
Long-only relative weight: 0.19
Source: Bank of America
Markets Insider
Ticker: LNT
Market cap: $14.4B
Sector and industry: Utilities; Electric Utilities
Five-year beta: 0.56
S&P quality rating: A
Long-only relative weight: 0.14
Source: Bank of America
Markets Insider
Ticker: AIZ
Market cap: $8.9B
Sector and industry: Financials; Insurance
Five-year beta: 0.54
S&P quality rating: B+
Long-only relative weight: 0.09
Source: Bank of America
Markets Insider
Ticker: AVB
Market cap: $29.6B
Sector and industry: Real Estate; Residential REITs
Five-year beta: 0.97
S&P quality rating: B+
Long-only relative weight: 0.04
Source: Bank of America
Markets Insider
Ticker: BALL
Market cap: $19.2B
Sector and industry: Materials; Containers & Packaging
Five-year beta: 0.85
S&P quality rating: A-
Long-only relative weight: 0.58
Source: Bank of America
Markets Insider
Ticker: CBOE
Market cap: $21.2B
Sector and industry: Financials; Capital Markets
Five-year beta: 0.65
S&P quality rating: B+
Long-only relative weight: 0.05
Source: Bank of America
Markets Insider
Ticker: CHRW
Market cap: $11.6B
Sector and industry: Industrials; Air Freight & Logistics
Five-year beta: 0.81
S&P quality rating: A-
Long-only relative weight: 0.03
Source: Bank of America
Markets Insider
Ticker: CSCO
Market cap: $183.3B
Sector and industry: Information Technology; Communications Equipment
Five-year beta: 0.84
S&P quality rating: B+
Long-only relative weight: 0.2
Source: Bank of America
Markets Insider
Ticker: CMS
Market cap: $19.5B
Sector and industry: Utilities; Multi-Utilities
Five-year beta: 0.38
S&P quality rating: A
Long-only relative weight: 0.55
Source: Bank of America
Markets Insider
Ticker: KO
Market cap: $295.3B
Sector and industry: Consumer Staples; Beverages
Five-year beta: 0.59
S&P quality rating: B+
Long-only relative weight: 0.38
Source: Bank of America
Markets Insider
Ticker: CL
Market cap: $84.3B
Sector and industry: Consumer Staples; Household Products
Five-year beta: 0.39
S&P quality rating: B+
Long-only relative weight: 0.64
Source: Bank of America
Markets Insider
Ticker: ED
Market cap: $35.1B
Sector and industry: Utilities; Multi-Utilities
Five-year beta: 0.34
S&P quality rating: A-
Long-only relative weight: 0.01
Source: Bank of America
Markets Insider
Ticker: COST
Market cap: $360.5B
Sector and industry: Consumer Staples; Consumer Staples Distribution & Retail
Five-year beta: 0.77
S&P quality rating: A
Long-only relative weight: 0.57
Source: Bank of America
Markets Insider
Ticker: DLR
Market cap: $48.2B
Sector and industry: Real Estate; Specialized REITs
Five-year beta: 0.6
S&P quality rating: B+
Long-only relative weight: 0.14
Source: Bank of America
Markets Insider
Ticker: DPZ
Market cap: $14.9B
Sector and industry: Consumer Discretionary; Hotels Restaurants & Leisure
Five-year beta: 0.87
S&P quality rating: A+
Long-only relative weight: 0.46
Source: Bank of America
Markets Insider
Ticker: ETR
Market cap: $25B
Sector and industry: Utilities; Electric Utilities
Five-year beta: 0.71
S&P quality rating: B+
Long-only relative weight: 0.56
Source: Bank of America
Markets Insider
Ticker: EQIX
Market cap: $74.5B
Sector and industry: Real Estate; Specialized REITs
Five-year beta: 0.68
S&P quality rating: B+
Long-only relative weight: 0.56
Source: Bank of America
Markets Insider
Ticker: ESS
Market cap: $17.9B
Sector and industry: Real Estate; Residential REITs
Five-year beta: 0.87
S&P quality rating: A-
Long-only relative weight: 0.02
Source: Bank of America
Markets Insider
Ticker: HD
Market cap: $340.1B
Sector and industry: Consumer Discretionary; Specialty Retail
Five-year beta: 0.99
S&P quality rating: A+
Long-only relative weight: 0.64
Source: Bank of America
Markets Insider
Ticker: JKHY
Market cap: $12.1B
Sector and industry: Financials; Financial Services
Five-year beta: 0.63
S&P quality rating: A
Long-only relative weight: 0.04
Source: Bank of America
Markets Insider
Ticker: KMB
Market cap: $47.2B
Sector and industry: Consumer Staples; Household Products
Five-year beta: 0.39
S&P quality rating: B+
Long-only relative weight: 0.39
Source: Bank of America
Markets Insider
Ticker: KR
Market cap: $39.2B
Sector and industry: Consumer Staples; Consumer Staples Distribution & Retail
Five-year beta: 0.44
S&P quality rating: A-
Long-only relative weight: 0.32
Source: Bank of America
Markets Insider
Ticker: LMT
Market cap: $131B
Sector and industry: Industrials; Aerospace & Defense
Five-year beta: 0.45
S&P quality rating: A
Long-only relative weight: 0.1
Source: Bank of America
Markets Insider
Ticker: MKC
Market cap: $21B
Sector and industry: Consumer Staples; Food Products
Five-year beta: 0.75
S&P quality rating: A-
Long-only relative weight: 0.53
Source: Bank of America
Markets Insider
Ticker: MDT
Market cap: $103.9B
Sector and industry: Healthcare; Healthcare Equipment & Supplies
Five-year beta: 0.83
S&P quality rating: B+
Long-only relative weight: 0.8
Source: Bank of America
Markets Insider
Ticker: MTB
Market cap: $26.8B
Sector and industry: Financials; Banks
Five-year beta: 0.76
S&P quality rating: A-
Long-only relative weight: 0.33
Source: Bank of America
Markets Insider
Ticker: PKG
Market cap: $17.4B
Sector and industry: Materials; Containers & Packaging
Five-year beta: 0.78
S&P quality rating: A-
Long-only relative weight: 0.05
Source: Bank of America
Markets Insider
Ticker: PEP
Market cap: $237.6B
Sector and industry: Consumer Staples; Beverages
Five-year beta: 0.53
S&P quality rating: A-
Long-only relative weight: 0.41
Source: Bank of America
Markets Insider
Ticker: PNW
Market cap: $9.7B
Sector and industry: Utilities; Electric Utilities
Five-year beta: 0.5
S&P quality rating: A-
Long-only relative weight: 0.96
Source: Bank of America
Markets Insider
Ticker: PG
Market cap: $400.3B
Sector and industry: Consumer Staples; Household Products
Five-year beta: 0.4
S&P quality rating: A
Long-only relative weight: 0.4
Source: Bank of America
Markets Insider
Ticker: PEG
Market cap: $39.3B
Sector and industry: Utilities; Multi-Utilities
Five-year beta: 0.61
S&P quality rating: B+
Long-only relative weight: 0.47
Source: Bank of America
Markets Insider
Ticker: DGX
Market cap: $16.3B
Sector and industry: Healthcare; Healthcare Providers & Services
Five-year beta: 0.88
S&P quality rating: A-
Long-only relative weight: 0.33
Source: Bank of America
Markets Insider
Ticker: RSG
Market cap: $63.1B
Sector and industry: Industrials; Commercial Services & Supplies
Five-year beta: 0.7
S&P quality rating: A-
Long-only relative weight: 0.72
Source: Bank of America
Markets Insider
Ticker: RMD
Market cap: $30.9B
Sector and industry: Healthcare; Healthcare Equipment & Supplies
Five-year beta: 0.66
S&P quality rating: A-
Long-only relative weight: 0.03
Source: Bank of America
Markets Insider
Ticker: ROL
Market cap: $23.1B
Sector and industry: Industrials; Commercial Services & Supplies
Five-year beta: 0.7
S&P quality rating: A
Long-only relative weight: 0.03
Source: Bank of America
Markets Insider
Ticker: SBUX
Market cap: $85.6B
Sector and industry: Consumer Discretionary; Hotels Restaurants & Leisure
Five-year beta: 0.94
S&P quality rating: B+
Long-only relative weight: 0.7
Source: Bank of America
Markets Insider
Ticker: WMT
Market cap: $538.1B
Sector and industry: Consumer Staples; Consumer Staples Distribution & Retail
Five-year beta: 0.5
S&P quality rating: B+
Long-only relative weight: 0.35
Source: Bank of America
Markets Insider
Ticker: WST
Market cap: $21.4B
Sector and industry: Healthcare; Life Sciences Tools & Services
Five-year beta: 1
S&P quality rating: A
Long-only relative weight: 0.44
Source: Bank of America
Markets Insider
Ticker: WRB
Market cap: $21.3B
Sector and industry: Financials; Insurance
Five-year beta: 0.61
S&P quality rating: B+
Long-only relative weight: 0.03
Source: Bank of America
Markets Insider
Ticker: XEL
Market cap: $32.5B
Sector and industry: Utilities; Electric Utilities
Five-year beta: 0.38
S&P quality rating: A
Long-only relative weight: 0.67
Source: Bank of America
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