Mounting geopolitical tensions and a closely contested presidential election may lead to increased market volatility in the coming weeks. Trivariate Research suggests that high-quality growth stocks may serve as a useful strategy for investors to mitigate future uncertainties. Historically, October is known for stock market volatility, and this week alone has seen fluctuations. After Monday’s gains, which pushed the Dow Jones Industrial Average above 43,000 for the first time and set a new record for the S&P 500, all three major indexes fell into negative territory on Tuesday. They then rose again on Wednesday, with the Dow reaching another all-time high. The market dynamics coincide with the earnings season, where about 79% of the first 50 S&P 500 companies reporting results have exceeded analysts’ expectations.
Adam Parker, founder and CEO of Trivariate Research and former chief U.S. equity strategist at Morgan Stanley, noted in a recent research note that the market’s cycle has shifted. He emphasized that purchasing and holding growth stocks is now less about predicting uncertainties and simpler than previously. Parker released a list of high-quality large-cap growth stocks with betas between 0.8 and 1.2, as of October 11, suggesting they are generally less volatile than the broader market.
Among health-care stocks, Eli Lilly has experienced significant gains, increasing over 57% this year and more than 3% this month. Recently, the company announced a $4.5 billion investment to establish a center for discovering new manufacturing methods. Eli Lilly also committed $364 million to research whether obesity drugs could help address unemployment in the UK. Analysts’ sentiment on Wall Street is largely positive, with 23 out of 28 analysts rating the stock as a strong buy or buy, and a consensus price target of $1,010 suggests over a 10% increase from Wednesday’s closing price.
In the consumer discretionary sector, Flutter Entertainment appeared on Trivariate’s list. The owner of FanDuel has seen its shares rise over 27% in 2024. The company saw a boost recently following the authorization of a $5 billion share buyback and projected total revenue of approximately $21 billion by 2027.
Conversely, Adobe has not performed as well, with its stock decreasing nearly 16% this year and over 11% in the past month. A significant drop of more than 8% occurred after Adobe released weaker-than-expected earnings and lowered its revenue guidance for the current quarter. Despite this, the majority of analysts covering Adobe remain optimistic, with 31 out of 40 giving it a buy rating and an average price target of $624, indicating a potential upside of 24% from Wednesday’s close.
Additional growth stocks highlighted by Parker include wholesale retailer Costco and hotel chain Hilton, both of which have outpaced the broader market, climbing over 34% and 30% year to date, respectively.
