These Dow stocks hold up the most during rough times for the market

Published Mon, Jan 6 20209:51 AM EST

Key Points

January is off to a rocky start with escalating tensions between the U.S. and Iran.
CNBC used Kensho, a hedge fund analytics tool, to screen which Dow stocks hold up the best when the Dow drops 5% or more in a single month.
Health care and consumer staples are best performing stocks during market turmoil, data shows.
Health care giant Merck trades positive nearly a third of the time and averages a loss of 2.4%, less the half the broader market.

With stocks off to a rocky new year amid tension in the Middle East, it could be time for investors to find some safe places to hide. The Dow Jones Industrial Average fell more than 230 points on Friday following news late Thursday night that the U.S. killed Iranian Gen. Qasem Soleimani, sending crude prices upward on fears of further escalation in the relations between the the U.S. and Iran. U.S. stock averages continued to fall on Monday after President Donald Trump threatened to impose sanctions against Iraq on Sunday, shortly after Baghdad called for American and foreign troops to leave the country. With stocks falling and the Cboe volatility index, a fear-gauge, spiking, investors are wondering if markets are in for a tumultuous January. With Iran vowing to retaliate , investors might want to hide out before things get ugly. CNBC used Kensho, a hedge fund analytics tool, to screen which Dow stocks hold up the best during market turmoil. The Dow Jones Industrial Average has dropped 5% or more in a single month 30 times since September 1999. Data shows, if you buy these health care and consumer staples stocks at the start of the market sell-off and sell one-month later, you will at least beat the market. Many of these stocks also pay a decent dividend. Health care giant Merck is the best performing Dow stock when the market tanks in a single month. It trades positive nearly a third of the time and averages a loss of 2.4%, less than half the broader market. Health care stocks UnitedHealth drops 2.6% on average and Pfizer falls 2.75%, both trading positive about a third of the time. Consumer staples Coca-Cola and Proctor & Gamble also beat the market during a major sell-off, each averaging a loss of 2.42% and 2.62%, respectively. Health care and consumer staples stocks perform well when the markets drop because they are defensive stocks, and less tied to the economic cycle. The theory behind defensive stocks is that consumers will always pay for health related items like medications and hospital visits and will always buy staple goods like toothpaste and laundry detergent, even in harder economic times. In addition to being defensive, Coca-Cola is also a low-volatility stock, meaning it doesn't trade uniformly with the major averages. Coca-Cola has a beta of 0.45, meaning that on a trading day when the S & P 500 might be down 1%, Coke would only be down 0.45%. The same applies to the upside.

Ramin Talaie | Getty Images

With stocks off to a rocky new year amid tension in the Middle East, it could be time for investors to find some safe places to hide.

The Dow Jones Industrial Average fell more than 230 points on Friday following news late Thursday night that the U.S. killed Iranian Gen. Qasem Soleimani, sending crude prices upward on fears of further escalation in the relations between the the U.S. and Iran.

U.S. stock averages continued to fall on Monday after President Donald Trump threatened to impose sanctions against Iraq on Sunday, shortly after Baghdad called for American and foreign troops to leave the country. With stocks falling and the Cboe volatility index, a fear-gauge, spiking, investors are wondering if markets are in for a tumultuous January. With Iran vowing to retaliate, investors might want to hide out before things get ugly.