Two ultimate defensive stocks to ride out anymore volatility in this already tumultuous year

CNBC's All-Weather Stock List, designed for volatile markets, added American Water Works (AWK) and Altria (MO) as defensive plays amid economic uncertainty and tariff concerns. AWK, up over 10% during a prior tariff correction, offers stable, domestic revenue and a 2.3% dividend yield. Altria, yielding nearly 7% with a low beta of 0.5, was identified by UBS and Trivariate Research as a safe haven stock with good price momentum, having risen 15% this year and 30% last year.

Analysis

The "All-Weather Stock List" is being expanded with American Water Works (AWK) and Altria (MO) due to an ongoing strategy to navigate anticipated market volatility, a condition initially predicted for 2025 that has already manifested. This defensive posture persists even as the S&P 500 has largely recovered from April lows, which were precipitated by tariff concerns that were subsequently eased, and is underscored by recent warnings, such as JPMorgan CEO Jamie Dimon's caution about potential deterioration in key economic indicators. American Water Works demonstrated its defensive qualities by gaining over 10% during the February 18 to April 8 tariff correction, a performance Trivariate Research attributes to its 100% domestic revenue, making it immune to tariffs and resilient during recessions, further supported by a 2.3% dividend yield. Altria is highlighted by UBS for its safe-haven characteristics, including high operational quality, low volatility evidenced by a beta of 0.5, and a significant dividend yield approaching 7%. Trivariate Research also identified Altria as a stock that performs well in market downturns, possesses positive price momentum, and offers a historically cheap valuation. Despite Altria's strong recent stock performance—up 30% last year and 15% year-to-date, reaching a six-year high, partly fueled by growth in its On! nicotine pouches—which raises some caution, its substantial dividend is presented as a mitigating factor for investors. The existing All-Weather List has demonstrated resilience, with six of nine picks performing positively or remaining flat, highlighted by Netflix's 14% gain, and no holding declining by more than 5%.

Key Decisions for Investors

• Investors anticipating continued market volatility or potential economic headwinds should consider evaluating defensive utilities like American Water Works for its tariff immunity, recession-resistant revenue profile, and consistent 2.3% dividend yield.
• Altria may appeal to income-oriented investors and those seeking portfolio stability due to its near 7% dividend yield and low beta, though its significant recent share price appreciation to a six-year high warrants careful assessment of valuation and entry points.
• Given the market's demonstrated sensitivity to macroeconomic news and tariff developments, maintaining a diversified portfolio that includes stocks with defensive characteristics, strong domestic revenue streams, and reliable dividend payments could be a prudent strategy.