Investor fear is once again moving the markets as tensions rise in the Middle East and other geopolitical challenges persist. In times of economic uncertainty and market volatility, investors often seek safer assets to protect their portfolios. This phenomenon, known as the flight to safety trade, involves shifting investments away from riskier assets to those offering greater security and stability.
During the past four weeks, Utilities emerged as the second best performing sector, while the Consumer Staples sector experienced a decline of -3.23% compared to the Consumer Discretionary sector’s decline of -5.54%.
Among the assets that investors typically turn to during a flight to safety trade are cash, gold, oil, and defensive stocks. These assets are considered less sensitive to changes in the business cycle and are more stable than other sectors.
The Flight to Safety
Amid rising geopolitical tensions and inflation concerns, investors are flocking to these safe-haven assets. The recent escalation of violence in the Middle East, with Hamas’ surprise attack on Israel, has prompted investors to seek safe investments. Here are three investment options to consider:
Oil
Hamas’ attack on Israel has raised concerns about the potential impact on oil production in the Middle East. If violence escalates and disrupts output in the region, it could affect oil prices worldwide. Marathon Petroleum Corporation (NYSE:MPC) is well-positioned to benefit from potential oil price increases. As the top-ranked oil and gas refiner, Marathon Petroleum operates as an integrated downstream energy company, offering stability and robust growth potential.
- Market Capitalization: $58.38B
- Quant Rating: Strong Buy
- Quant Sector Ranking (as of 10/30/23): 12 out of 242
- Quant Industry Ranking (as of 10/30/23): 1 out of 74
Marathon Petroleum Corporation also stands out as a dividend stock pick, with a strong track record of consistent payments and solid fundamentals. The company recently increased its quarterly dividend by 10% and announced an additional $5B in share repurchases, reinforcing its commitment to delivering returns to shareholders.
Gold
Gold has long been considered a safe-haven investment during times of economic uncertainty. While recent price fluctuations have been influenced by factors such as the Federal Reserve’s stance on interest rates, the war in Israel has reignited investor interest in gold. Harmony Gold Mining Company (NYSE:HMY) offers unique exposure to the gold market. As the largest gold producer in South Africa, Harmony Gold Mining Company is a sustainable mining and exploration company with a global footprint.
- Market Capitalization: $2.90B
- Quant Rating: Strong Buy
- Quant Sector Ranking (as of 10/30/23): 3 out of 289
- Quant Industry Ranking (as of 10/30/23): 1 out of 46
With more than 70 years of experience in the industry, Harmony Gold Mining Company is well-positioned to capitalize on rising gold prices. The company’s strong financials, diversified revenue streams, and focus on enhancing margins make it an attractive investment option. Despite recent gold price fluctuations, Harmony Gold Mining Company has consistently delivered strong growth and profitability.
Defensive Stocks
Defensive stocks are companies that tend to perform relatively well during market volatility and economic downturns. These stocks offer essential products and services, protecting investors from significant portfolio losses. The Andersons, Inc. (NASDAQ:ANDE) is an Ohio-based food distributor that specializes in commodities trading, ethanol production, and supplying plant nutrients.
- Market Capitalization: $1.65B
- Quant Rating: Strong Buy
- Quant Sector Ranking (as of 10/30/23): 4 out of 187
- Quant Industry Ranking (as of 10/30/23): 1 out of 7
The Andersons, Inc. operates a diversified business with over 100 facilities and holds more than 30 U.S. patents. Despite facing inflationary pressures and pricing fluctuations, the company has displayed resilience and continued profitability. Its strong renewable business, ethanol partnership with Marathon Petroleum, and diverse product lines enable it to pass costs onto consumers and generate consistent growth.
Investors seeking to fortify their portfolios and reduce risk exposure can consider these stocks in the flight to safety trade. While there are no guarantees in the financial markets, these assets offer strong growth potential, sustainable profitability, solid valuations, and have outperformed the S&P 500.
It is crucial to conduct your research and analyze investment options based on your risk tolerance and investment objectives. However, these stocks serve as a starting point for investors looking to protect their capital and capitalize on the flight to safety trade.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the company.
