This is a tough market to navigate. After falling about 20% from the February high, the S&P 500 came roaring back over the past week. Is this the end of the trouble or just a bear market rally?
Nobody knows. And that’s the problem. Tariff and trade war fears dragged stocks to within a whisker of a bear market, down 20% from the high on a closing basis. Then last Wednesday happened.
The Trump administration announced a 90-day pause on reciprocal tariffs for most countries while new arrangements are negotiated. The market exploded higher. On April 9th, the S&P closed 9.5% higher for the day. It was tied for the eighth biggest up day in history, dating back to 1928. The market has gone sideways since.
While there is reason for optimism, we might not be out of the woods yet.
Approximately 130 nations are willing to negotiate. It seems the most likely outcome at this point is that many countries will reset trade barriers in a way that is more favorable to the U.S. Of course, China is still playing hardball, at least for now. But it is increasingly likely that several months from now this country has more favorable trade arrangements. The market also tends to like tax cuts, deregulation, and ramped-up energy production.
There could be a breakthrough with China. Reports of agreements with other large trading partners could also help end the tariff worries. We could move beyond these tariff issues and look ahead to a strengthening economy in the next week or shortly after, and the market could be back in business that fast.
But the tariff situation could also deteriorate from here. The trade war with China could escalate further. There could be a big fight with Europe. One morning’s headlines could drag the market right back to trade war panic. There’s also the economy. Tariff worries really got hot and heavy this month. What have these worries, and the relentlessly negative headlines, done to the consumer?
The recent volatility may have damaged an economy that was already vulnerable in the near term. It could be that, even beyond the tariff issues, the next stop will be recession fears. It could be a double-dip of troubling issues for the market that drags stock prices lower.
So, how do you play it?
Many investors I speak with are selling. They’re waiting it out on the sidelines until there is more certainty. But when will things become certain? Let’s say you do the same and you’re right. The market plunges back to the recent low and beyond. When do you get back in?
Few people are willing to try to catch a falling knife while stocks are crashing. There is always an argument to be made that stocks will go much lower even after the market has a significant drop. And things can turn around fast. The S&P rallied 9.5% in one day last week. Stocks could regain most of the losses in as little as a week while you twiddle your thumbs and the opportunity is lost.
And that’s if you’re right. But stocks could go the other way while you’re on the sidelines. Suppose the market rockets from here. Then, when do you get back in? Market timing has proven to be a bad strategy. It’s nearly impossible to navigate unpredictable events.
There’s nothing wrong with caution. If selling part of a portfolio enables you to weather the volatility with the rest of your portfolio, it could be for the better, regardless of when you reinvest the cash. But it’s best to pare down stock positions when the market is high. Historically, a beaten-down market is the best time to buy stocks if you have a reasonable investing time frame.
There are certain stocks that should hold up relatively well if there is more trouble in the market yet also benefit when the market gets back on track. Here are two strong dividend stocks to consider.
2 Strong Dividend Stocks for Today’s Turmoil
The Williams Companies Inc. (WMB)
Yield: 3.4%
Williams is involved in the transmission, gathering, processing, and storage of natural gas. It operates the large Transco and Northwest pipeline systems that transport gas to densely populated areas from the Gulf to the East Coast. Roughly 30% of the natural gas in the U.S. moves through Williams’ systems.
Like most other midstream energy companies, the overwhelming bulk of earnings are guaranteed by long-term contracts. And those contracts have automatic inflation adjustments built in. It also operates a near monopoly in its areas and doesn’t have to compete in price with other similar companies. As a large and established player, it can easily grow with network expansion.
The earnings are highly reliable. The company also benefits from the fact that natural gas demand is growing in both the U.S. and overseas. It also should benefit from increased natural gas production and a reduced regulatory burden.
The company continues to raise future earnings guidance as business is booming. Even after the recent market downturn, WMB still sells within 5% of the 52-week high with a 10% YTD return and a 61% return over the past year.
AbbVie Inc. (ABBV)
Yield: 3.7%
AbbVie is a U.S.-based biopharmaceutical company formed in 2013 as a spinoff from Abbott Laboratories (ABT). AbbVie is a research-based pharmaceutical company that specializes in small-molecule drugs. It’s a cutting-edge company with a terrific pipeline.
AbbVie became an industry giant because of its mega-blockbuster drug Humira. It’s an autoimmune medication that became the world’s bestselling drug with annual sales of $20 billion. But the tremendous success of that drug became a problem as Humira lost its patent overseas a few years ago, and it lost its U.S. patent in 2023.
AbbVie has long planned for this eventuality and has done a stellar job launching new drugs capable of replacing the diminishing Humira revenue. New immunology drugs, Skyrizi and Rinvoq, have already replaced Humira’s peak revenues. In the fourth quarter, Skyrizi and Rinvoq collectively delivered $5.61 billion in revenue. Those drugs alone have replaced the Humira revenue, which peaked at a little over $20 billion annually. The company also raised revenue forecasts on the two drugs by $4 billion to $31 billion a year by 2027.
The earnings report showed AbbVie has replaced Humira revenue and is well on track towards strong earnings growth in the years ahead. The patent cliff had been holding the stock back but that’s gone now. And the company has guided for 21% revenue growth in 2025.
ABBV hit an all-time high in early March. Very often, the stock pulls back after a surge to new highs. And that was happening. But this market took ABBV, along with just about everything else, way down. The recent plunge gets the stock’s habit of pulling back after a surge out of its system. ABBV is at a great price now and it offers both defense and growth.
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