Investors spent the summer piling into technology and financial stocks as the economy showed signs of improvement, leading to speculation that the Federal Reserve would raise interest rates this month.

Barclays Capital Plc. this week advised investors to put their money into safer stocks that will maintain their value as the market loses momentum. Disappointing economic data and the approaching presidential election have quelled any possibility of a rate hike before December.

“Given high valuations, weakening data and central bank uncertainty, we recommend positioning for increased volatility,” Jonathan Glionna, head U.S. equity strategist at the investment bank, said. "Specifically, we advocate a portfolio of 33 stocks that reduce exposure to high volatility."

The S&P 500 stock index has risen 2.1 percent since July 1, with the technology industry rising 9 percent and financials gaining 7 percent. The utility and telecommunications sectors, which investors typically buy when they want stable dividends, fell 6 percent in that period.

But the Institute of Supply Management this month reported a slowdown in factory activity with a reading of 49.4 percent in a key benchmark. Anything less than 50 indicates contraction.

“The ISM manufacturing index, which correlates well with earnings growth, analyst sentiment and the beta rotation, recently fell below 50 for the first time since February 2016,” Glionna said. “U.S. economic surprise indices have fallen after peaking in late July and earnings revisions are slowing as well. S&P 500 valuations are near the cycle highs of 17 times.”

The Barclays analysts set up a data screener to sift through stocks and find potential winners, eventually settling on names from a broad mix of industries. The list is overweight consumer discretionary, healthcare and industrials while underweight energy, technology and utilities.

“Our screen filtered out stocks with the highest near-term momentum and expensive valuations,” Glionna said in a Sept. 12 note obtained by Newsmax Finance. “We included stocks with a combination of high dividend yield and growth. We excluded stocks with the highest combination of low volatility and high dividend yield, given the risk of over-crowding.”

33 Stocks to Handle Market Volatility

1. Marriott International Inc. (MAR)
2. Wyndham Worldwide Corp. (WYN)
3. Hasbro Inc. (HAS)
4. Scripps Networks Interactive Inc. (SNI)
5. Time Warner Inc. (TWX)
6. Lowe's Companies Inc. (LOW)
7. Home Depot Inc. (HD)
8. L Brands Inc. (LB)
9. V.F. Corporation (VFC)
10. Molson Coors Brewing Co. (TAP)
11. CVS Health Corp. (CVS)
12. Walgreens Boots Alliance Inc. (WBA)
13. Nasdaq Inc. (NDAQ)
14. Hartford Financial Services Group Inc. (HIG)
15. Willis Towers Watson (WLTW)
16. XL Group Ltd. (XL)
17. Amgen Inc. (AMGN)
18. Gilead Sciences Inc. (GILD)
19. Abbott Laboratories (ABT)
20. Anthem Inc. (ANTM)
21. Cardinal Health Inc. (CAH)
22. Patterson Companies Inc. (PDCO)
23. Quest Diagnostics Inc. (DGX)
24. Bristol-Myers Squibb Co. (BMY)
25. General Dynamics Corp. (GD)
26. Eaton Corp. (ETN)
27. Parker-Hannifin Corp. (PH)
28. Snap-on Inc. (SNA)
29. Stanley Black & Decker Inc. (SWK)
30. W.W. Grainger Inc. (GWW)
31. FLIR Systems Inc. (FLIR)
32. Analog Devices Inc. (ADI)
33. Avery Dennison Corp. (AVY)
Source: Barclays Capital

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