A survey from Natixis Investment Managers conducted last fall indicated that 74% of institutional investors anticipate a market correction in 2026. They have a range of concerns, from the potential bursting of the tech bubble to various geopolitical and macroeconomic influences. This year, the Nasdaq Composite has seen minimal movement, while the S&P 500 has increased by about 1.7%.
Market adjustments are not new. Interestingly, there have been eight revisions this year compared to just one last year, reflecting a shift in market conditions, particularly in bear markets over the past decade.
So, perhaps it’s important to consider how AI might influence future wealth. There’s a report highlighting a lesser-known company deemed an “essential monopoly,” which supplies crucial tech to both Nvidia and Intel.
You can’t really avoid a market downturn, but you can think ahead by choosing stocks that respond variably during tougher times. In healthcare, there are two sectors that might hold up well.
AbbVie and Merck, both well-known pharmaceutical companies, offer more than just medications; they’re seen as strong defensive stocks. These stocks are consistently in demand, whether the economy is booming or not, but they truly shine when growth stocks struggle during recessions.
In fact, during past downturns, AbbVie’s stock price increased by 24% last year amid the bear market, while Merck’s jumped an impressive 49%. The S&P 500, on the other hand, finished the year down 18%. Looking back to 2018, when the S&P dropped 4%, AbbVie only fell by 1% while Merck surged 40%.
However, it’s worth noting that both stocks typically lag behind in bull markets. Their long-term performance generally aligns with the S&P 500, but not always in sync with its larger moves. Over the last decade, AbbVie has logged an annualized return of about 15%, while Merck follows with around 10%. The S&P 500, by comparison, has seen an annualized return of 14% in the same timeframe.
A hallmark of resilient stocks is their dividends, and both AbbVie and Merck deliver solid returns in that area. Just last month, AbbVie raised its dividend by 5% to $1.73 per share, offering a yield of 3.10%. This marks the 13th consecutive year of increases since it gained independence from Abbott Laboratories in 2013.
Meanwhile, Merck maintains a quarterly dividend of $0.85 per share, yielding 2.99%. Like AbbVie, Merck has also continuously increased its dividends for 15 years, many times significantly outperforming the S&P 500’s average yield of 1.13%.
Looking ahead to 2026, both companies expect solid growth. AbbVie projects adjusted diluted earnings per share to rise 43% to 45% above 2025 levels, which analysts predict may lead to a 12% uptick in AbbVie’s stock price. Merck anticipates a global sales increase of 1% to 3%, potentially reaching between $65.5 billion and $67 billion. Despite the impact of its Cidara acquisition, analysts are optimistic about Merck, giving it a consensus buy rating and a median price target of $125 per share, indicating a potential 7% increase.
So, if you’re considering investments, AbbVie and Merck not only offer exciting prospects for growth in dividends but may also act as a robust shield during economic downturns.
It might be worthwhile to assess AbbVie, though the Motley Fool Stock Advisor suggests other top stocks that could provide strong returns over the next few years, with AbbVie not being among them.
Additionally, past recommendations reveal that investing early, like in Netflix or Nvidia, can lead to fantastic long-term gains. The key point is to weigh options based on potential performance against the market.
Ultimately, as the stock landscape continues to evolve, careful consideration and research will be essential in navigating potential downturns.
