The stock market has been highly volatile so far this year due to worries over skyrocketing inflation, expected monetary policy tightening, an ongoing geopolitical crisis, and China’s recent COVID-19 outbreak adding to the existing supply chain disruptions. Furthermore, despite the Fed’s efforts to combat surging inflation, Bank of America Corp. (BAC) is warning of a ‘Recession shock’ and high inflation, which could pose a significant threat to the economic recovery. Consumer prices rose by 8.5% in March, their highest gain since 1981.
Investors have been betting on mega-cap stocks to withstand the current market headwinds and potential recessionary shock. Given their strong cash flows and stable revenue and earnings growth prospects, mega-cap companies provide steady returns to investors. Also, such established companies are well-positioned to withstand the market’s fluctuations and are considered “safer” than mid-cap and small-cap companies. Investors’ interest in the mega-cap stocks is evident in the Vanguard Mega Cap ETF’s (MGC) 5.8% gains over the past month.
