Market Downturn? 2 Defensive Stocks That Thrive in Economic Uncertainty
As the S&P 500 and Nasdaq Composite Index enter correction territory amid relentless selling pressure, investor confidence is wavering. Many are wondering which direction the market will take in these uncertain times. It’s a worrying climate—one that prompts investors to look for safer havens. Enter defensive stocks—historically robust performers during market downturns. Investing in companies with solid fundamentals and consistent demand can shield your portfolio from the brunt of economic upheaval. Here, we’ll explore two defensive stocks that industry experts believe hold promise in this turbulent environment.
Defensive Stock #1: Cigna (NYSE: CI)
Cigna, one of the leaders in the health insurance sector, positions itself advantageously during economic downturns. Health care isn’t a luxury; it remains a necessity, ensuring a steady demand for health insurance even when households tighten their belts. What’s more is that the concentrated nature of the health insurance market allows Cigna to exert considerable pricing power—an ultimate advantage in times of adversity.
Key Fundamentals:
- $7.6 billion in cash reserves
- Over $4 billion in free cash flow per quarter
- Stable revenue model
Analysts are notably bullish on Cigna, with 18 out of 22 giving it a “Buy” rating and a consensus price target that implies a 14% upside from current levels. It’s hard to ignore the strength of this health insurer’s fundamentals, particularly in an environment rife with economic uncertainties.
Defensive Stock #2: Cboe Global Markets (NYSE: CBOE)
Another contender in this defensive investment landscape is Cboe Global Markets. As a leader in the options trading arena, Cboe is poised to take advantage of increased market volatility. The company’s exposure to approximately 30% of the options market gives it leverage when volatility spikes, driving trading activities from both retail investors and institutional hedgers alike, which in turn boosts revenue.
Key Considerations:
- Positioned to capitalize on high market volatility
- Generates revenue from increased options trading volume
- Valuation of 24 times forward earnings
While Cboe has a solid market position, analysts adopt a more cautious stance compared to Cigna. The consensus price target for CBOE stands at $209.88, slightly below its current price of around $219, meriting a “Hold” rating. However, should trading activity continue to surge, analysts may soon find themselves revising their targets upward—a phenomenon worth watching closely.
Conclusion
Both Cigna and Cboe enhance investor portfolios with their defensive advantages amid economic uncertainty. Cigna offers a bulwark through the unrelenting demand for healthcare services, ensuring its stability during downturns. Meanwhile, Cboe capitalizes on market volatility, allowing it to thrive even as uncertainty reigns. For investors looking to weather the storm, these stocks serve as potential anchors in a stormy economic sea. Add them to your watchlist and prepare to act wisely in this challenging market landscape.
