By Barbara Kollmeyer
Evercore says 'low leverage leaders' are key
Monster Beverage is one &#34;low-leverage&#34; leader that could offer a shelter for investors in a possibly looming bond and oil storm, says Evercore.
Worries around higher bond yields and inflation have taken a recent toll on the S&amp;P 500, which could be headed for a third-straight losing session on Tuesday. While not a worrying streak yet, concerns are rising.
Barclays, for example, has warned that the massive flood of money rushing into stocks is at risk of rushing out just as fast. Meanwhile, our call of the day from Evercore flags clear threats from rising oil prices and bond yields, warning investors are entering this potentially bumpy period with less protection.
&#34;The broad stock market's rally from the 3/30 low has been impressive, decisively setting fresh records on momentum rarely seen since the Bullsupercycle began in 1982,&#34; said an Evercore ISI team led by senior managing director Julian Emanuel.
And they see &#34;longer-term upside,&#34; given that even as the market slid in March, defensive stocks were underperformers meaning investors were taking that pullback in stride. April's strong bounce also compares to similar rallies in history that were followed by more gains.
However, &#34;rising oil and yields pose near-term speed bumps,&#34; said Evercore, whose founder Roger Altman warned a day earlier that the oil market was reaching a &#34;tipping point&#34; that could send prices to $150 a barrel, and shock the economy.
Emanuel and his colleagues said risks for stocks are building as long as WTI crude remains above $100 a barrel and the 10-year yield above 4.5%. They see particular risks for consumers and the economy if oil prices do not ease by the July 4th holiday.
What's particularly dangerous now is the lack of protection for investors. In March, investors had bought protection through stock-index put options - the right to sell at a given price and given date. So that protection against a slump kept them from dumping stocks in a panic and subsequent rewinding of that protection provided fuel for the rally in April.
With investor protection a bit lower, Evercore said they're now recommeding &#34;tapping the brakes&#34; on low defensive stocks - such as strongly performing tech names. Instead, they are keeping a longstanding tilt to low-leverage stocks, which don't carry high debt that will create a worry down the road when rates rise. The latter has seen mostly consistent &#34;all-weather outperformance&#34; throughout market ups and downs of this year.
Low-leverage stocks also offer &#34;exposure to a potential rerun of dotcom era leadership,&#34; as that factor was a leading performer into the dotcom peak as smarter investors started to buy companies that had less-risky balance sheets.
Evercore said it has refreshed its screens to look for potential outperformers among low-leverage stocks in the top quintile of the Russell 3000 RUA, based also on sales and earnings per share revisions and companies with $500 million-plus market capitalization. They also scanned for similar-sized companies with heavier debt and worse revisions in the Russell 3000.
Here are some of the &#34;low leverage leaders&#34; they prefer:
Source: Factset, Bloomberg, Evercore ISI Research
And here are some &#34;low-leverage laggards&#34; they've flagged:
Source: Factset, Bloomberg, Evercore ISI Research
The markets
U.S. stock futures (ES00) (YM00) (NQ00) are dropping, as the 10-year Treasury yield BX:TMUBMUSD10Y creeps up to 4.609%. Brent crude (BRN00) is down nearly 2%.
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-Barbara Kollmeyer
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05-19-26 0704ET

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Evercore warns investors of potential risks from rising oil prices and bond yields, suggesting a shift towards 'low-leverage leaders' like Monster Beverage for protection. The S&P 500 faces pressure as concerns grow over inflation and market stability. With investor protection decreasing, Evercore advises caution on defensive stocks and highlights the importance of low-debt companies in navigating upcoming market challenges.

- Evercore identifies "low-leverage leaders," such as Monster Beverage, as potential safe havens for investors amidst rising bond yields and oil prices.  
- The S&P 500 has shown volatility, influenced by concerns over inflation, and Evercore warns of significant risks if oil prices remain high.  
- With investor protection decreasing, Evercore recommends focusing on low-debt stocks, predicting they will maintain steady performance through market fluctuations.

Dow Jones

S&P 500

Monster Beverage

SPDR FD Consumer Staples

SPDR S&P 500

Invesco Food & Beverage ETF

VG Consumer Stap

iShares Core S&P 500

iShares US Consumer Staples ETF

VG S&P 500

First Trust NASDAQ Food & Beverage

Evercore

Factset Research

Home Depot

Alphabet

Alphabet - C

Blackstone

Bank of America

BANK OF AMERICA CORPORATION DEP SHS REP 1/1000TH INT NON CUM PFD QQ

BANK OF AMERICA CORPORATION DEP SHS REP 1/1200TH PRF SERIES '5'

BANK OF AMERICA CORPORATION 7.25% NON-CUM PERP CONV PFD SER L

BANK OF AMERICA CORPORATION 5.875%NON CUM DEP SHS REP1/1000TH SER HH

BANK OF AMERICA CORPORATION DEP SHS REP 1/1200TH PRF SERIES '2'

BANK OF AMERICA CORPORATION 5% DEP SHS REPR 1/1000TH NON CUM PFD LL

BANK OF AMERICA CORPORATION DEP SHARES REP 1/1000TH PERP PFD SER 'E'

BANK OF AMERICA CORPORATION INCOME CAPITAL OBLIG NTS DUE 15/12/2066

BANK OF AMERICA CORPORATION 4.375% DP SH RP 1/1000TH IN NON CU PF NN

BANK OF AMERICA CORPORATION DEP SH REP 1/1200TH PRF SER 1 USD25

BANK OF AMERICA CORPORATION 5.375%DEP SHS REP 1/1000TH NON CUM SR KK

BANK OF AMERICA CORPORATION 6%NON CUM DEP SHS EACH REP 1/1000 SER GG

BANK OF AMERICA CORPORATION DEP SHS REP 1/1200 PFD SER 4 USD25

BANK OF AMERICA CORPORATION DEP SHS REP 1/1000TH NON CUM PFD SER SS

BANK OF AMERICA CORPORATION 4.125%DEP SH REP 1/1000 PFD SER PP USD25

Bank of America Corp

Investors are unprotected against oil and yield shocks. Here are the stocks to buy and avoid.