Morgan Stanley says these stable stocks will help you ride out the coming Fed and inflation storms

Published Sun, Dec 19 20218:59 AM EST

Morgan Stanley thinks stocks with stable earnings and that have a fair price could be a good place for investors to hide while the Federal Reserve addresses inflation. To combat 39-year high inflation, the Federal Reserve announced on Dec. 15 that it would pivot to a more aggressive schedule for tapering its bond-buying program. The central bank also anticipates three interest rate hikes next year. Morgan Stanley screened for stocks with earnings stability at a reasonable price. "We think earnings stability will be a key determinant of stock performance over the coming months as the market grapples with a more hawkish Fed and execution risk due to higher inflation and continued supply/demand imbalances," said Michael Wilson, Morgan Stanley's chief U.S. equity strategist. The Wall Street firm selected overweight-rated names from the top 500 U.S. stocks by market capitalization. The stocks are in the top 50% of earnings stability within their respective sectors and have earnings estimate dispersion in the bottom 50% of their sectors. Take a look at Morgan Stanley's list here. The Wall Street firm said Mondelez is one of the packaged food companies that should only see moderate inflation in 2022. Morgan Stanley said Mondelez is raising prices to offset the rising input costs. Other food companies like McDonald's , PepsiCo and Monster Beverage also made the firm's list. Morgan Stanley also highlighted health care stocks Cigna , CVS Health and Humana . CVS Health said at its investor day earlier this month that its sales will accelerate in the year ahead, as it offers more health-care services and combines its drugstores and insurance business. The drugstore chain is uniquely positioned to help fix a broken health-care system, said CEO Karen Lynch at the investor day event. Around 85% of Americans live within 10 miles of a CVS store. Each day, the company said, about 4.5 million consumers visit those stores. Payment companies Mastercard and PayPal also earned spots on Morgan Stanley's list. Retail brokerage Charles Schwab , mega-cap technology giant Meta Platforms , and home improvement stock Lowe's are also good stocks to hide in during the inflation and Fed financial storm. Humana, Mastercard, McDonald's and Mondelez also appear on Morgan Stanley's fresh money buy list. — with reporting from CNBC's Michael Bloom.

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Morgan Stanley thinks stocks with stable earnings and that have a fair price could be a good place for investors to hide while the Federal Reserve addresses inflation.