Stocks keep hitting new lows. Here's how to protect your portfolio and generate some returns

Published Sat, May 21 20228:56 AM EDT

Jesse Pound @/in/jesse-pound @jesserpound

The market rally that began in late March 2020 has ended with a thud, and investors on Wall Street and Main Street alike are shifting toward a more defensive approach. On Friday, the S & P 500 briefly traded more than 20% below its record high , before closing flat thanks to a late-day rally. For some market experts, that will qualify as a bear market, while others won't make the call until the index closes at that level. Whether it is an official bear market or not, the selling has certainly felt relentless in recent weeks. "We joke it's a bear market when they sell our stocks, but in bear markets they sell everyone's stocks. Last week had that look, as did Wednesday this week," Frank Gretz of Wellington Shields said in a note to clients on Friday. While it might be difficult to find big winners during periods like this, there are some strategies to help limit your losses and maybe grind out some small gains. Recession sectors Bear markets are often accompanied by an economic recession, and there is growing concern among Wall Street pros and economists that the U.S. could be headed that direction. Goldman Sachs chief U.S. equity strategist David Kostin warned this week that a recession would likely mean a significantly deeper pullback to the S & P 500, possibly to around 3,360 . Even though many experts don't expect a recession until 2023, the market could have already started to price that in. According to Goldman, utilities, energy, consumer staples and health care are outperforming sectors in the 12 months prior to recessions. However, once the economy tips into recession, that leadership narrows to staples and health care, Kostin wrote. Of course, there is a chance that the U.S. economy does not fall into recession, but does see continued high inflation. In that case, energy and materials stocks could extend their stay among the outperformers , according to Bank of America. Fortress stocks When looking at stocks with solid quality ratings in those defensive sectors, healthy dividend yields emerge as a theme. In a time where inflation is high and stock valuations are volatile, investors tend to drift toward the security of regular payouts. With that in mind, CNBC Pro looked for stocks that have held up well in recent bear markets and also sport a 2% dividend yield. The list includes several consumer staples stocks such as Clorox and Campbell Soup , as well as a health care name in Gilead Sciences . A look at ETFs that have outperformed this year also shows some of the benefits of income stocks. The Invesco S & P 500 High Dividend Low Volatility ETF (SPHD) , for example, is slightly positive year to date. Some of its top holdings include Kraft Heinz and Verizon , as well as energy companies like Chevron . Cheap names Given the breadth of the sell-off, there could be companies whose valuations have fallen to unsustainably low levels, even in the event of an economic slowdown. CNBC Pro looked for stocks in the S & P 500 that are trading well below their average price-to-earnings levels , including big names likes Disney and Advanced Micro Devices . And Wall Street analysts are starting to stick up for some tech stocks again, even after big drawdowns. On Friday, Wedbush analyst Dan Ives wrote that Apple is " a compelling name to own and ride out the market storm " and that the smartphone-maker's slowdown in China would not be as bad as some fear. Meanwhile, JPMorgan's Mark Murphy wrote that Salesforce is " too cheap to pass up " even though there are some signs that enterprise software could see slowing growth