Navigating 2026: Why Low-Beta Stocks Make Sense as the Fed Shifts Direction

The Federal Reserve cut interest rates by 25 basis points in December, bringing the federal funds rate target to 3.5%-3.75%. However, what happens next remains the central question for investors as 2026 approaches. When will the fed meet again, and what decisions will the new Fed chair make? This uncertainty makes now an ideal time to examine defensive investment strategies.

The Leadership Transition Creates Policy Fog

Jerome Powell’s tenure as Federal Reserve chair concludes on May 15, 2026, when a successor will assume control. This transition introduces a critical question: will the pace of rate cuts continue, accelerate, or reverse? The incoming chair faces immediate pressure to establish credibility while inheriting an economy navigating mixed inflation and employment signals.

Three of the four scheduled Fed meetings in the first half of 2026 will still occur under Powell’s watch, but markets are already pricing in uncertainty about the second half. When will the fed meet again after the leadership change? Investors won’t have clarity until the new chair unveils their policy priorities and communication style.

Why This Matters for Your Portfolio

The Fed’s actions directly impact different asset classes. For capital-intensive sectors like utilities, lower rates boost profitability by reducing debt servicing costs and expanding margins. Conversely, rate volatility tends to punish high-sensitivity stocks while rewarding defensive positions.

During periods of policy uncertainty—especially leadership transitions—high-beta stocks experience outsized swings. Investors seeking stability should pivot toward low-beta securities (beta between 0 and 1) that historically outperform during turbulent transitions.

Five Stocks Built for Uncertain Times

Consumer Staples Picks

Monster Beverage (MNST) carries a Zacks Rank #1 rating and boasts a beta of 0.48, among the most stable in its peer group. Corona, CA-headquartered, the company benefits from surging global energy drink demand and an asset-light model. Long-term earnings growth stands at 16.81%, with 2026 EPS consensus estimates showing a 5.14% increase over the past two months. Revenue projections of $9 billion reflect 9.48% growth.

Mama’s Creations Inc. (MAMA), also ranked Zacks #1, focuses on prepared Italian-inspired fresh foods distributed through major retailers. Its beta of 0.79 reflects moderate stability while delivering outsized growth. The East Rutherford, NJ firm projects 2026 sales of $218.2 million—a 26.49% jump—with EPS consensus growing 4.35% recently.

Utilities for Stability

Dominion Energy (D) operates regulated electric and natural gas utilities across the eastern United States with predictable, rate-based earnings. Its Zacks Rank #2 status and 0.70 beta provide downside protection. The Richmond, VA utility pays a 4.51% dividend—significantly outpacing the S&P 500’s 1.4% yield. Long-term earnings growth targets 10.26%, with 2026 sales projected at $16.48 billion (5.14% growth).

Ameren Corporation (AEE) commands a Zacks Rank #2 with a 0.57 beta, among the sector’s lowest. Operating regulated electric and gas utilities across the Midwest, the St. Louis-based company benefits from a large capital investment plan and supportive regulatory environment. Its 2.85% dividend yield combines with 8.52% long-term earnings growth. 2026 sales should reach $9.71 billion, up 6.33%.

Sempra Energy (SRE) rounds out the selection with a Zacks Rank #2 and 0.73 beta. The San Diego utility operates assets in both the U.S. and Mexico, diversifying revenue streams. Its 2.91% dividend yield supports 7.33% long-term earnings growth, with 2026 sales estimated at $14.74 billion (8.5% increase).

The Bigger Picture

All five stocks demonstrated positive 12-month price performance and combine low volatility with earnings expansion. As investors wonder when will the fed meet again and contemplate the implications of leadership transition, these selections offer a proven defensive framework for weathering policy uncertainty ahead.

The Zacks research team is preparing its 10 top stock picks for 2026, with a historical track record showing +2,530.8% gains from 2012 through November 2025—quadrupling the S&P 500’s +570.3% return. These recommendations arrive January 5.