Investors are flocking to defensive investments as geopolitical tensions continue to rise…
For the week ending May 13, the S&P 500 fell by 2.41%. Meanwhile, the Dow Jones, Nasdaq Composite, and Russell 2000 declined by 2.14%, 2.80%, and 2.55%, respectively.
Driving last week’s declines were growing recession fears, China’s lockdowns, and Russia’s war in Ukraine.
That’s because even though the U.S. Federal Reserve is raising rates, money managers are beginning to fear that the efforts may not be enough.
Meanwhile, continued disruptions in Shanghai are putting pressure on a variety of companies, as the city is a major manufacturing, shipping, and transportation hub for goods worldwide.
All of these factors are being further exacerbated by Russia’s continued invasion of Ukraine. What the country had initially anticipated being a three-day war has effectively become a long-term conflict.
And it ultimately fueled record sanctions and defensive actions by Western allies. The U.S., U.K., and the European Union (EU) have all taken steps to help Ukraine defend itself and tank Russia’s economy for the unprovoked attack.
This further stoked geopolitical tensions between Russia and the West, pushing the Kremlin to ramp up its threats. In turn, countries such as Finland and Sweden said they would pursue NATO membership to strengthen border security and their defensive capabilities.
This only amplified global uncertainty for money managers and consumers alike. But it also helped paint a clearer picture of how to invest in the present market.
As a result, many are turning to defensive dividend-yielding stocks like Northrop Grumman (NOC).
Northrop pays a dividend of 1.39% and it’s also one of the biggest defense contractors in the world, developing and selling aircraft vehicles, space crafts, cybersecurity systems, satellites, and radars for the U.S. and other government-approved nations.
This makes it a strong play during times of global volatility, as it regularly receives millions in government contracts for military and intelligence technologies.
And defense spending will only continue to grow as a result – likely fueling greater orders and backlog for the company moving forward.
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