Markets have endured a stormy beginning to the New Year after suffering hard times last month. The broadest measure of the markets, the S&P 500, has declined for the third consecutive week. Down 8% year to date, this is the poorest start to the year ever for the index.

All other benchmarks are also languishing in the red. Ahead of the Fed’s meeting next week, few market watchers expect another rate hike to be announced. In fact, the four rate hikes proposed for the year could be reduced.

But another startling opinion is that the central bank could change course and begin easing once again. If this is indeed the case, it would make sense to pick stocks with good metrics which will gain from such a scenario.  

Poor Start to 2016

A number of factors have contributed to the turmoil experienced by the markets this month. Even though stocks had ended last quarter on a positive note, all three benchmarks closed in the red in December. The continuous decline in oil prices had a negative impact on energy shares. Fears about China’s economy were a major contributor to these losses.

But what was particularly hurtful to investors was poor domestic economic performance. A wide range of economic indicators on manufacturing, services, industrial production, inflation and retail sales are telling us that the recovery is in peril.

Fed Chair Janet Yellen has emphasized time and time again that all central bank actions are “data dependent.” Rate hikes are merely a reflection of the strength of the economy and become unlikely in the light of such evidence.  

Is QE4 Likely?

Market watchers believe four rate hikes are unlikely this year. U.S. interest rate futures indicate that merely two rate hikes could happen. In fact, several experts and market watchers are saying that another month of poor data and familiar headwinds could force the Fed to reverse course.

This is not unprecedented as can be seen from the annals of other countries. In Sweden, Australia and the Eurozone, rates were hiked just after the crisis of 2008. Now all of them have descended to historically low levels. Some market watchers believe that the first rate hike was poorly timed. As evidence of this, they point toward the response of the markets.

Now, it is likely that a reversal could be in the cards. Some believe that this could happen in September, if the going gets tougher for the markets. But others think that the situation warrants near-term action. The gap between the junk bonds market and the S&P 500 is evidence that trouble is brewing, they believe.

Our Choices

What is clear from the observation of leading analysts and experts is that a near-term rate hike is unlikely. Instead, a change of course by the Fed later this year could be on the table. In this case, stocks which thrive in a regime of relatively lower interest rates are likely to be in focus.

Utilities and Real Estate Investment Trusts (REITs) are two sectors which are likely to benefit even if rates are not revised further upward. Additionally, taking good metrics into account is crucial in this “stock picker’s” markets. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.

New Senior Investment Group Inc. (SNR - Snapshot Report) is a REIT focused on investing in senior housing properties located in the U.S.

New Senior Investment Group has a Zacks Rank #1 (Strong Buy) and projected growth for the current year is 18%. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 5.99, lower than the industry average of 15.78. Its earnings estimate for the current year has improved 1% over the last 30 days.

Hospitality Properties Trust (HPT - Snapshot Report) is a REIT which owns and leases hotels to unaffiliated hotel operators.

Hospitality Properties has a Zacks Rank #2 (Buy) and expected earnings growth of 10.6% for the current year. It has a P/E (F1) of 6.28, lower than the industry average of 11.88. Its earnings estimate for the current year has improved 0.1% over the last 30 days.

New Residential Investment Corp. (NRZ - Snapshot Report) is an REIT which concentrates on investing in, and actively managing, assets related to residential mortgages.

New Residential Investment has a Zacks Rank #2 and expected earnings growth of 7.3% for the current year. It has a P/E (F1) of 5.18, lower than the industry average of 7.37. It has a PEG ratio of 0.60, lower than the industry average of 1.20.

AGL Resources Inc. (GAS - Analyst Report) is an energy services holding company whose principal business is gas distribution.

AGL Resources has a Zacks Rank #2 and its estimated growth for the current year is 16.6%. Its earnings estimate for the current year has improved 0.5% over the last 30 days.       

Sempra Energy (SRE - Analyst Report) is an energy services holding company involved in the sale, distribution, storage and transportation of electricity and natural gas.

Sempra Energy has a Zacks Rank #1 and its projected growth for the current year is 7%, in line with the industry average. Its earnings estimate for the current year has improved 1.2% over the last 30 days. It has a PEG ratio of 2.15, lower than the industry average of 3.56.