The week starts with the NASDAQ Composite and S&P 500 trading at a 1.62% and 1.46% discount compared to the Saturday levels.
Considering the rising tension between Iran and Israel, the dip in key index values seems justified. Trading.biz analyst Rahul Nambiampurath identifies the Middle Eastern conflict as a driver for short-term stock and commodity-based picks, with the oil prices rising above the $90 per barrel mark and the U.S. dollar strengthening against the likes of the Iranian Rial.
Rahul believes that during uncertain times like these, investors might focus on safer investment options, including defensive stocks and even gold.
Short-term bets to consider
Rahul has identified key themes that traders can consider, especially with the geopolitical tensions running high:
- Energy sector: Rising oil prices can benefit firms in the gas and oil industry. Based on this rationale, traders can consider ExxonMobil (XOM) and Chevron (CVX).
- Defence and Aerospace: Looming concerns related to war can increase defence spending. The focus should be on firms like Lockheed Martin (LMT) and Northrop Grumman (NOC).
- Financial Sector: If the dollar strengthens, financial institutions like Citigroup and JPMorgan will be negatively affected by fluctuating exchange rates. These institutions could be considered for short-term positions.
Besides the mentioned sectors, consumer goods and technology stocks, specifically those of companies with international market presence, could be negatively impacted by currency fluctuations.
What if investors want to go mid-term?
If the focus is on mid-term picks, utilities and healthcare make the best possible bets owing to their defensive nature. These include already beaten-down stocks like Pfizer (PFE), which Rahul identifies as a dark horse in the mid-term space. As for utilities, NextEra Energy Inc (NEE) might have the legs to outperform, courtesy of its subdued year-to-date returns of 2.45%.
NEE Daily Chart: TradingView
Even though the daily chart of NEE hints at a bearish, descending channel pattern, the RSI indicator, or rather momentum, seems to be bullish. If the momentum keeps up and NEE manages to move above $70, it can very well go up to $79.61, completely bucking the bearish trend. However, a correction lower than $56 can bring more buyers into the space.
Shahriar Pourreza, an Analyst at Guggenheim, has marked NEE as a Buy with an expected target price of $80, aligning with Rahul’s analysis.
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