How to choose stocks in the volatile US stock market? Investment bank BMO first recommends the dividend growth sector.

BMO Capital Markets predicts that the US stock market will experience volatility in 2025 and has released a list of dividend growth stocks that it says can help investors withstand the fluctuations. The company stated on Wednesday that these types of stocks can help mitigate losses while allowing investors to participate in a strong market. Although BMO is optimistic about the US stock market this year, it believes investors are shifting towards traditional investment strategies after focusing heavily on developments centered around artificial intelligence. BMO's Chief Investment Strategist Brian Belski stated in a report that this shift may bring challenges compared to the "easy" market gains of the past two years. Meanwhile, stronger than expected economic data has weakened expectations for the Federal Reserve to continue significant interest rate cuts, causing US treasury yields to spike. Belski stated, "This clearly raises investors' anxiety levels, especially considering valuation levels." The strategist noted that dividend growth stocks have historically shown stable annualized returns compared to the S&P 500 index during periods of increased volatility: Belski stated, "Given the current market dynamics, we believe price volatility will become more frequent in the coming months, requiring investors to be more disciplined and forward-thinking." Currently, BMO's target price for the S&P 500 index is 6700 points. The criteria for BMO's screening method include stocks that have not cut dividends in the past five years and have seen per-share dividend growth higher than the S&P 500 index in the past year. Below are the individual stocks covered by BMO and their ratings: American Family Life Assurance Company (AFL.US) - Not rated CF Industries Holdings, Inc. (CF.US) - Outperform the market CSX Corporation (CSX.US) - Outperform the market Carter's Incorporated (CAT.US) - Not rated Cincinnati Financial Corporation (CINF.US) - Outperform the market Comcast Corporation Class A (CMCSA.US) - Not rated Deere & Company (DE.US) - On par with the market Dell Technologies, Inc. Class C (DELL.US) - Not rated Domino's Pizza, Inc. (DPZ.US) - Outperform the market eBay (EBAY.US) - On par with the market FedEx Corporation (FDX.US) - On par with the market Hartford Financial Services Group, Inc. (HIG.US) - On par with the market Hess Corporation (HES.US) - Outperform the market Hewlett Packard Enterprise Co. (HPE.US) - Not rated Kroger Co. (KR.US) - On par with the market Marathon Petroleum (MPC.US) - Outperform the market Nordson (NDSN.US) - Not rated A. O. Smith Corporation (AOS.US) - Not rated Steel Dynamics (STLD.US) - On par with the market Tractor Supply Company (TSCO.US) - Not rated Allegion (ALLE.US) - Not rated Everest Group (EG.US) - Outperform the market TE Connectivity Ltd. (TEL.US) - Not rated