Factors like high inflation, weak job growth reports, and surging COVID-19 cases have been fostering immense volatility in the markets of late, leading to concerns about a potential market correction in the near term. For investors seeking to hedge their portfolios against such market fluctuations, we think high-beta stocks MP Materials (MP), Overstock.com (NASDAQ:OSTK), Canaan (CAN), and Altus Midstream (ALTM) are best avoided now. Let’s discuss these names.Impressive third-quarter corporate earnings, declining jobless claims, and rising consumer spending drove the markets to fresh highs in October. However, increasing concerns about high inflation, weak job growth reports for November, supply chain constraints, the Federal Reserve’s hawkish monetary policy, and the discovery of the new COVID-19 omicron variant caused the major stock indexes to pull back last week.
Notably, the CBOE's volatility index has gained 14.7% over the past month, reflecting high market volatility. Though major benchmark indexes have rebounded lately, the aforementioned factors will likely keep the markets under pressure in the near term. High beta stocks tend to be highly correlated with the broader markets. Thus, these stocks typically witness tremendous fluctuations in a highly volatile market.
Thus, we expect high-beta stocks MP Materials Corporation (MP), Overstock.com, Inc. (OSTK), Canaan Inc. (CAN), and Altus Midstream Company (NASDAQ:ALTM) to slump in price in the near term, owing to their weak fundamentals and overvaluations. So, we think they are best avoided now.