A recent survey by Natixis Investment Managers revealed that a significant majority, 74%, of institutional money managers anticipate a market correction by 2026. Concerns range from the potential bursting of the tech bubble to geopolitical instability and broader macroeconomic factors. Presently, the Nasdaq Composite remains relatively flat year-to-date, with the S&P 500 showing modest growth of about 1.7%.
Market corrections are not uncommon, with the past decade experiencing eight corrections or bear markets, including one last year. While such downturns are unavoidable, investors can mitigate their impact by considering defensive stocks—those that tend to resist market volatility. Two notable contenders in the healthcare sector are AbbVie and Merck.
Both companies are recognized for their resilience during economic downturns. AbbVie has recently seen a stock increase of 1.71%, bringing it to a current price of $231.40, while Merck has risen by 1.79%, now priced at $121.37. Their products maintain steady demand, critical in downturns as well as during periods of growth, making them less affected by market fluctuations.
Historically, AbbVie and Merck have demonstrated strong performance during recent market declines. For instance, in the 2022 bear market, AbbVie stock climbed 24% while Merck surged by 49%; conversely, the S&P 500 dropped by 18%. During the market contractions of 2018, AbbVie saw a slight decline of 1%, while Merck experienced a significant rise of 40%. While both stocks have tended to lag during strong market years, their long-term annualized returns are generally comparable to the S&P 500—AbbVie at 15% and Merck at 10%, relative to the S&P’s 14%.
Another appealing aspect of AbbVie and Merck is their robust dividends, a trademark of solid defensive stocks. AbbVie recently increased its dividend by 5% to $1.73 per share, solidifying its 13-year streak of annual hikes since its spinoff from Abbott Laboratories in 2013. This latest adjustment reflects a dividend yield of 3.10%. Merck, too, boasts a strong quarterly dividend of $0.85 per share, yielding 2.99%, having raised its dividends consistently for 15 years.
Looking ahead to 2026, AbbVie projects adjusted diluted earnings per share between $14.37 and $14.57, marking a potential increase of 43% to 45% compared to 2025. Analysts are optimistic about AbbVie, predicting a 12% upside in its stock price. Merck anticipates global sales between $65.5 billion and $67 billion—a modest growth projection—and its 2026 earnings guidance has been somewhat influenced by the recent acquisition of Cidara. Nonetheless, analysts have labeled Merck as a consensus buy, with a median price target of $125 per share, indicating a potential increase of 7%.
With their history of solid dividends and defensive positioning in uncertain market conditions, AbbVie and Merck are poised to be valuable assets for investors looking to navigate possible market downturns in the coming years.
