There are many reasons for the market to be bearish today, but the primary ones are the FOMC and the outlook for interest rates. The FOMC is set to cut rates this year, but the economic data isn’t cooperating the way the market would like. The labor data remains solid, showing resilience despite economic headwinds, and other economic data is the same: each negative is offset by a positive that may lead the FOMC to disappoint the market.
The most critical data, the PCE price index, shows inflation cooling but slower than hoped, raising serious doubts about the pace of rate cuts priced into stocks. Even if the Fed does follow through with what the market expects, there is a risk of a significant correction because of sector rotation.
The takeaway is that the bull market in equities isn’t over; we’ll likely see new highs for the S&P before the end of 2025. However, there is a serious risk of a significant correction between then and now because interest rate cuts are critical to the earnings outlook. Investors should focus on stocks that do well in all business environments to mitigate the risk and stay invested. Those companies have strong fundamentals, healthy balance sheets, and competitive advantages that will help sustain business if not allow them to grow.
Kimberly-Clark Corporation for High-Yielding Value
Kimberly-Clark (NYSE: KMB) is a blue-chip consumer staples company whose business is unaffected by economic conditions. Everybody needs toilet paper daily; there is just no getting around that fact, and it helps sustain revenue and operational quality throughout the business cycle. The results in 2024 show this company is contracting slightly, but cash flow remains solid, driving a substantial dividend and share repurchases.
The outlook for 2025 includes a return to top-line growth, margin expansion, and dividend increases. This company is a Dividend Aristocrat and King, which sums up why it is a good bear-market investment. The company has sustained distribution increases for over 50 years and can be counted on continuing to pay and raise the distribution regardless of what 2025 brings for the broad economy. Investors may anticipate the pace of distribution growth to slow but continue.
Another factor that makes KMB a good bear market play is its beta. Beta measures volatility relative to the S&P 500, and KMB stock is 70% less volatile. That means its downturns will be less severe than the S&P 500, adding a layer of protection to stock portfolios should the broad market enter a prolonged downturn. Cash flows also allow for share buybacks, which offset share-based compensation and add value for shareholders.
Kinder Morgan: A High-Yielding Real Asset
Kinder Morgan (NYSE: KMI) is another solid dividend-paying stock for bear-market portfolios. Unlike the upstream and downstream energy plays, this midstream infrastructure operator’s revenue and earnings are not tied to the price of oil and natural gas but to the volume it carries across its pipelines. The forecast for LNG prices is for them to fall, but analysts forecast a boom in volume because of it. LNG is a critical element in many industries' shift to greener operations. Demand will likely increase as its price falls - a situation compounded by expanding LNG capability globally. Among the many industries turning to LNG is the data center industry, which needs cheap, green energy to power AI. KMI also pays a solid dividend, worth more than 5%, with shares at a multi-year high.
UnitedHealth Group Has Secular Tailwinds
UnitedHealth Group (NYSE: UNH) is insulated from a bear market to a degree. Not only will Americans still require health insurance, but the growing workforce and aging population will also provide a tailwind for businesses. The critical takeaways are that this fortress-quality company is growing in 2024, outperforming its estimates, and is forecasted to grow in 2025. It also pays a healthy dividend, the payment is expected to grow, and share repurchases are part of the allure. Share repurchases shaved 1.2% off the share count in 2024 and are expected to continue robustly in 2025. The dividend is worth about 1.4%, with shares at a fresh all-time high. Regarding beta, it is 40% percent less volatile than the S&P 500.
