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Stifel analysts believe we are in a “bull steepening” scenario in the second half of the year.
This is when the 2-year yield (US2Y) falls more than the 10-year yield (US10Y).
And with the 10-year minus the 2-year yield curve un-inverting for the first time since 2022, “we have our doubts about the currently widespread belief that ‘Fed cuts = Buy stocks,’” said Stifel analyst Thomas R. Carroll.
“Investors think ‘the Fed will save us,’ and have driven down 2-year yields (US2Y), buoying U.S. stocks and bull steepening the 10-year-2-year yield curve,” he said.
In a note, he analyzed previous “bull steepening” yield curves and found that economic slowdowns were always followed by bottoming 10-year-2-year “bull steepening” yield curves, and that these yield curves have historically led to the weakest stock markets.
Carroll said that his view for the second half of 2024 is a continued bull steepening yield curve, and recommended industries that outperformed during these scenarios.
Industries include those with defensive value such as pharmaceuticals, biotech and life sciences, household goods and products, food, beverage and tobacco, and healthcare equipment and services.
Stifel analysts listed the 50 largest equity cap buy-rated defensive value stocks:
This is part 1:
- Costco Wholesale Corp. (COST) – Total return rate in one year: 66.3%
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- Philip Morris International (PM) – Total return rate in one year: 40.2%
- Abbott Laboratories (ABT) – Total return rate in one year: 14.4%
- Intuitive Surgical Inc. (ISRG) – Total return rate in one year: 55.8%
- Stryker Corp. (SYK) – Total return rate in one year: 28.9%
- Boston Scientific Corp. (BSX) – Total return rate in one year: 53.7%
- Mondelez International Inc. (MDLZ) – Total return rate in one year: 10.2%
- Altria Group Inc. (MO) – Total return rate in one year: 35.3%
- Colgate-Palmolive Co. (CL) – Total return rate in one year: 52.1%
- Waste Management Inc. (WM) – Total return rate in one year: 35.9%
- Zoetis Inc. (ZTS) – Total return rate in one year: -4.2%
- Becton Dickinson & Co. (BDX) – Total return rate in one year: -11.7%
- Republic Services Inc. (RSG) – Total return rate in one year: 44.3%
- General Mills Inc. (GIS) – Total return rate in one year: 14.9%
- Equifax Inc. (EFX) – Total return rate in one year: 47.3%
- GE Healthcare Technologies (GEHC) – Total return rate in one year: 23.7%
- Monster Beverage Corp. (MNST) – Total return rate in one year: -14%
- Veeva Systems Inc. (VEEV) – Total return rate in one year: 0.5%
- Dexcom Inc. (DXCM) – Total return rate in one year: -30.2%
- The Kraft Heinz Co. (KHC) – Total return rate in one year: 15.4%
- Veralto Corp. (VLTO) – Total return rate in one year: –
- Zimmer Biomet Holdings (ZBH) – Total return rate in one year: -1.8%
- The Cooper Companies (COO) – Total return rate in one year: 16.3%
- Leidos Holdings (LDOS) – Total return rate in one year: 59.7%
- The Estee Lauder Companies (EL) – Total return rate in one year: -41.7%
