Rate Cut Delay Fears Grip Markets Amid Rise in Inflation: 4 Safe Bets

Economic Overview - A sharp rise in inflation has unsettled markets, with concerns that the Federal Reserve may delay its next rate cut until the second half of the year, potentially weakening the economy's health [1] - The consumer price index (CPI) increased by 0.5% in January, following a 0.4% rise in December, marking the sharpest increase since August 2023 and surpassing analysts' forecast of 0.3% [4] - Year-over-year, CPI climbed 3% in January from 2.9% in December, recording its biggest annual gain since April 2024 [5] - The producer price index (PPI) also increased by 0.4% in January, maintaining the same pace as the prior month, with an annual rise of 3.5% [7] Federal Reserve and Interest Rates - Given persistent inflation indicated by both CPI and PPI, a Federal Reserve rate cut is unlikely before the second half of the year, with the central bank previously cutting interest rates by 100 basis points over three consecutive meetings starting in September 2024 [8][9] - The Fed has paused its rate-cutting cycle, keeping interest rates steady at 4.25-4.5% in January, and is likely to remain cautious in the months ahead [9] Investment Recommendations - In light of economic uncertainties, it is suggested to invest in utility stocks such as NiSource Inc. (NI), Atmos Energy Corporation (ATO), American Water Works Company, Inc. (AWK), and New Jersey Resources Corporation (NJR), which belong to defensive sectors and carry favorable Zacks Ranks [2][10] - These stocks are categorized as low-beta stocks, with beta values greater than 0 but less than 1, making them suitable for investors seeking stability [3] Company Profiles - NiSource Inc. (NI): Provides natural gas and electricity to nearly 4 million customers across six states, with an expected earnings growth rate of 9.1% and a current dividend yield of 2.82% [11][12] - Atmos Energy Corporation (ATO): Engaged in regulated natural gas distribution, serving approximately 3.4 million customers, with an expected earnings growth rate of 5.1% and a current dividend yield of 2.38% [13][14] - American Water Works Company (AWK): Provides essential water services to over 14 million customers in 24 states, with an expected earnings growth rate of 8% and a current dividend yield of 2.44% [15][16] - New Jersey Resources Corporation (NJR): An energy services holding company providing natural gas and clean energy services, with an expected earnings growth rate of 7.5% and a current dividend yield of 3.94% [17][18]