Equities Slip at September Start; Evercore ISI Recommends Hedge Strategies to Mitigate Volatility

Equities began September with a shaky performance. Evercore ISI suggests that investors can mitigate volatility by allocating to negative‑beta stocks—those whose price movements have historically moved opposite to the broader market. Recent concerns over rising oil prices and their impact on inflation have contributed to a three‑day decline in the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average, driven in part by higher bond yields. According to Evercore strategists led by Julian Emanuel, purchasing negative‑beta equities enables a long‑term portfolio to weather volatility spikes caused by interest‑rate changes, geopolitical tensions, and the upcoming midterm elections. The firm screened the S&P 500 and identified 115 negative‑beta stocks in September, down from 121 in August, and selected the top 20. Financials, utilities, consumer staples, and energy comprised roughly 70% of these selections. Energy stocks, tied to oil price dynamics, were described as a “synthetic S&P 500 put option” due to geopolitical pressures. Occidental Petroleum, with a six‑month beta of –1.23, ranked fourth among the highlighted stocks. Analyst Stephen Richardson rates Occidental as an outperform, noting its strong Q2 results: $3 billion of free cash flow before working capital, the highest since Q3 2022, and a $1.9 billion reduction in debt, bringing total debt to $11.8 billion. Chevron, with a beta of –0.90, also carries an outperform rating. Chevron plans to more than double its Venezuelan production to 600,000 barrels per day by 2031 through a $7 billion investment, up from the current 280,000 bpd. Defensive consumer staples identified include Kroger and Altria.

Source link