Over the last couple of months, investors have worried that the markets may be running out of steam. The Dow Jones and S&P 500 continue to trade fairly close to their all-time highs, and the NASDAQ has built on last year's impressive gains. The fear comes from anticipation of higher interest rates, which are expected to creep higher over the next year.
The good news is that the Federal Reserve has recently said that it plans to keep short-term interest rates near zero for a “considerable” amount of time. That put some fears to rest, but at the same time, the central banks seems likely to end its bond-buying program next month, which will eventually lead to slightly higher interest rates.
It goes without saying that one of the primary reasons the stock market has enjoyed such strength in recent years has been low interest rates. Low rates have resulted in money flowing into the stock market that would have otherwise found its way into fixed-income assets.
Low interest rates have not only benefitted the stock market, but also the overall economy. The irony of the situation is that with increased signs of economic improvement comes increased willingness to allow interest rates to rise. This will be reflected in the stock market, which will either slow down (which it already has done in 2014), or it will make a significant pull back after its multi-year bullish run.
The question is not if, but more when, the market will correct. It will happen, and when it does, stocks as a whole will fall, but there are some stocks that are safer, and more defensive in nature than others. The following five stocks are all excellent options for investors who anticipate a market correction.