Everything is deep red today — which stocks are most, and least, sensitive to a market crash?
Nvidia, cruise companies, and tech stocks are historically sensitive to the market. Defensive names like Campbell’s and General Mills might hold up if everything goes south.
The S&P 500 posted its biggest daily loss of the year on Monday after President Trump confirmed his tariff plans: 25% on Canada and Mexico and a doubling of levies on China to 20%, starting today.
And in early trading on Tuesday, investors have picked up right where they left off, with a flurry of sell orders sending markets deep into the red and the S&P 500 Index down 1.5% at the time of writing.
If you’re nervous that this latest market bump could turn into a broader meltdown, which stocks would be most likely to get dragged down with the S&P 500?
Before we get into it, let’s define beta. Beta measures how sensitive a stock has historically been to the overall market. Sadly, it’s not a crystal ball, but just a useful tool to tell us about what’s happened historically. A beta of 1 means that a stock has historically moved in line with the market, above 1 suggests that a stock has been more volatile than the market, and below 1, the opposite — the stock has typically moved less than the markets move.
With that in mind, based on a three-year look back, data from FactSet reveals which stocks have the highest beta to the S&P 500.
At the top of the list is cruise company Carnival, which, with a beta of 2.8, is even more correlated to the swings of the market than volatile AI leader Nvidia (2.4). Tesla, which has now shed almost all of its postelection gains, is 17th out of the ~500 names in the index, with a beta of 1.8. That means that, based on historical averages, if the market gained 1%, Tesla would jump 1.8%.
Other cruise stocks, like Norwegian and Royal Caribbean, also find themselves on the list of stocks most sensitive to the market, as does automaker Ford with a beta of 2.1. Highly cyclical companies, which need a stronger consumer to buy their discretionary products, might not be the safest part of the market to play in if you expect the red days to keep coming.
DEFENSE, DEFENSE
Meanwhile, sectors that traditionally perform well in uncertain times have held up better overall this year, with healthcare, real estate, and consumer staples the top three sectors in the S&P 500 so far this year.
Interestingly, however, topping the list of stocks with the lowest beta is aerospace and defense giant Northrop Grumman, with a very modestly negative beta — implying that the company’s stock usually takes no notice of what the market does, and on balance actually does the opposite more times than it follows the index.
Also in the “least sensitive” list are consumer staples names like Campbell’s and Kraft Heinz, companies that tend to sell foodstuffs that are sought after by folks with nuclear bunkers who are preparing for the end of the world.
Of course, correlations are just that: they’re correlations. They can tell us what has happened coincidentally in the past, but they don’t tell us why, and they aren’t always as useful as we’d like them to be in predicting the future. And, as the saying goes, “In a financial crisis, all correlations go to one.”
