Steady Over Sexy Could Save Your Portfolio

These six bank, defense, and health care stocks are promising safe havens in what's shaping up to be a shaky stretch.

-  LARRY LIGHT

IF THE LONG-THREATENED recession ends up slamming the economy, the stock market likely will be brutalized. But like snowflakes, all stocks are not the same. Some show promise of gaining nicely in fraught times, as the rest of this year is shaping up to be, even if others suffer.

On the surface, an argument can be made that 2022's winners should be 2023's, as well. Higher-than-normal inflation, persistent Federal Reserve-engineered interest rate hikes, a stubborn pandemic, and international tensions all combined to gut-punch every S&P 500 category last year except for two. Energy (up 64%) and utilities (2%) were the only sectors to show increases.

But expecting a reprise is far from assured. The propellants for energy last year, war-induced oil and gas shortages, are waning, and a recession and a likely mild winter will push down demand for these commodities. And, of course, some investors shun energy companies out of climate-change concerns. As for utilities, they have never been big gainers, typically eking out low single-digit advances. Electricity use tends to decrease in an economic slump.

So where does that leave investors seeking positive returns? There's a trio of equity groupings that stand to do well over the next 12 months, especially if the recession, assuming it arrives, is as shallow as most economic forecasters think. Banks, defense, and health care stocks sure don't sound sexy, but given how ghastly 2022 was, perhaps that's just what investors should be looking for.

BANKS

When it comes to picking bank stocks, size matters. JPMorgan Chase (JPM), the largest U.S. banking company by assets, and Bank of America (BAC), the second-biggest lender, are at the top of our list. The smaller lenders should do well, just not as well.