Recession's Shadow Casts Doubt On Soft Landing: Safeguard Your Portfolio With These Stocks

The stronger-than-expected U.S. jobs data for January has caused the Federal Reserve to push back its deadline for rate cuts. While the markets anticipated the central bank to begin easing interest rates from as early as March, Federal Reserve Chairman Jerome Powell said in a CNBC interview, "We want to see more evidence that inflation is moving sustainably down to 2%."

This comes as the sticky inflation rose 4.6% year over year in December, significantly higher than the Fed's 2% target. As macroeconomic headwinds and geopolitical tensions persist, Jeffrey Gundlach, CEO and founder of DoubleLine Capital, foresees a recession in 2024. 

"I think you want cash to be able to get into emerging market trade once the economy slows and perhaps goes into recession," Gundlach told CNBC. "Globally, there are certainly many pockets of recession at present. If we go into the United States recession, I think we will see a buying opportunity, and you want cash for that."

Coca-Cola Co.

Coca-Cola Co. KO is one of the most popular recession-proof stocks in the U.S., with an attractive dividend payout history. The Dividend Aristocrat pays $1.84 in dividends annually, yielding 3.09% on its current price. 

The company also boasts a solid earnings growth rate, as its net operating revenue increased 8% year over year to $11.95 billion in the third quarter ended Sept. 29. Coca-Cola's earnings per share (EPS) came in at $0.71 in the last reported quarter, indicating a 9% rise year over year. 

Analysts expect the company's annual revenue to rise 5.7% year over year to $45.50 billion in fiscal 2023, while its bottom line is expected to improve 8.5% from the same period last year to $2.69 for the year ended Dec. 31

Barclays has an Overweight rating on Coca-Cola stock with a price target of $66, indicating a potential upside of nearly 11%.

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Procter & Gamble Co.

Procter & Gamble Co. PG is one of the largest fast-moving consumer goods (FMCG) manufacturers in the world, operating in over 70 countries. Shares of PG have risen by over 7% so far this year, outperforming the benchmark S&P 500 index's 5.3% gains over this period. 

Proctor & Gamble is a highly coveted Dividend Aristocrat stock, paying $3.76 annually, which yields 2.39% on the current price. Procter & Gamble has an astounding dividend payout history as well, as it has paid a dividend for 133 consecutive years and has raised it for 67 consecutive years. 

UBS currently has a Buy rating on Proctor & Gamble stock with a price target of $178, indicating a potential upside of over 13%. Raymond James also has an Overweight rating on the stock, with a price target of $175, reflecting a potential upside of 11.4%.

Merck & Co. Inc.

Shares of Merck & Co. Inc. MRK, one of the largest pharmaceutical companies in the world, rose nearly 15% year to date. The stock still has significant upside potential, as UBS, which has a Buy rating on Merck, raised its price target of $148 earlier this month, indicating a potential upside of over 18%. Barclays also has an Overweight rating on Merck with a price target of $145, indicating a potential upside of 15.7%.

Earlier this month, Merck announced its plans to acquire Elanco Animal Health Inc. for $1.3 billion to strengthen its animal health drug pipeline business. Elanco is launching six products in the U.S. by next year. 

"The addition of this innovative portfolio of cold water and warm water aqua products across vaccines, anti-parasitic treatments, water supplements and nutrition, will establish Merck Animal Health as a leader in aqua," Merck Animal Heath President Rick DeLuca said. This should allow Merck to maintain its growth momentum even during an economic downturn. 

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