Stay defensive with these global stocks amid market volatility, analysts say

Published Thu, Apr 7 20229:15 PM EDT

HSBC , Credit Suisse and UBS have named their top global stock picks as they advise investors to stay defensive amid continued market volatility. Stocks certainly had a rocky start to 2022, as a string of macro events cast a pall on global equity markets. "We are now at a stage with rising inflation and monetary tightening, when recession and even stagflation are within a range of plausible outcomes," HSBC's strategists, led by Edward Stanford, said on Apr. 6. Stocks with payouts As investors look to navigate the uncertainty, UBS compiled a list of "high-quality" dividend-paying stocks that it says are unlikely to reduce payouts. Dividend investing is a popular strategy for investors seeking to protect their portfolios in periods of high volatility. "We have used our quantitative models to find stocks that are high quality compared to their peers, and that pay a dividend and are unlikely to cut it," UBS analysts led by Amanda Belcaid wrote on Apr. 1. The screen threw up picks across sectors including communications, consumer discretionary, healthcare and real estate. The stocks include Home Depot , tobacco company Swedish Match , Deutsche Bank and medical devices manufacturer Medtronic , UPS , mobile home parks owner Equity Lifestyle and renewables firm NextEra Energy . Credit Suisse's defensive picks in Europe Credit Suisse said markets are facing a "confluence of headwinds," with the Swiss investment bank now expecting growth to decelerate in Europe. "The ability of companies to pass on rising input costs to their customers will once again be tested. It remains to be seen how much firepower companies will have in 2022, especially given shrinking disposable household income," Credit Suisse's analysts, led by Joelle Anamootoo Natzkoff, said on Mar. 30. Against this backdrop, Credit Suisse has named its top outperform-rated stocks with defensive attributes. Defensive stocks are shares that tend to be stable regardless of how the overall market performs. The bank likes BMW for its focus on the premium market, leadership in electric vehicle sales and its strong balance sheet. Spain's Cellnex Telecom also makes the cut, with the company viewed by the bank as well positioned to benefit from high inflation, a strong long-term outlook as well as a healthy M & A pipeline. Other picks by the bank include building materials manufacturer CRH and banking group Lloyds , and British consumer goods firm Reckitt Benckiser . HSBC's 'safe havens' Another closely-watched indicator of future stock market performance is U.S. Treasurys — and some say they could be suggesting a recession is on the cards, with a key part of the Treasury yields inverting on Apr. 1. Such yield curve inversions are seen by some as recession harbingers, although the yields were no longer inverted Thursday. HSBC, however, believes that the direction of the yield curve is a more important influence on equity performance. Read more These global stocks were first-quarter winners and Wall Street sees more upside ahead Wall Street banks name their top global stock picks to navigate market volatility Equity strategist Stanford noted on Apr. 6 that defensive sectors have traditionally been a "safe haven" during periods of falling yield curves below the long-term average — a phase which the U.S. yield curve is currently in. HSBC screened for European stocks with a history of outperformance during such periods. The screen turned up real estate firms Sagax and Vonovia , as well as EDP , Orsted and National Grid in the utilities sector. Other stocks that made the screen include chocolate manufacturer Barry Callebaut and Dutch information services firm Wolters Kluwer . HSBC also screened for stocks with a history of outperformance during periods when the yield curve is steepening and below the long-term average — a phase which the bank says could be next for Treasurys. The list includes German chemicals firm Covestro , easyJet , steel manufacturer ArcelorMittal and Volkswagen .

Market volatility has been on the rise on the back of soaring inflation, geopolitical tensions and rising recession risks. But some Wall Street banks have a raft of stock picks to navigate this challenging backdrop.

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HSBC, Credit Suisse and UBS have named their top global stock picks as they advise investors to stay defensive amid continued market volatility.