As macroeconomic uncertainties continue to unsettle global markets, U.S. telecom stocks are proving to be a relative safe haven. According to Bernstein analysts, telecom companies like AT&T (NYSE:T), Verizon (NYSE:VZ), and T-Mobile (NASDAQ:TMUS) have outperformed the S&P 500 year-to-date, with T-Mobile even hitting an all-time high.

Telcos Buck the Trend in Choppy Markets
Bernstein attributes this outperformance to a rotation toward defensive sectors. In volatile environments, investors tend to favor companies with stable cash flows, low beta, and resilient earnings—characteristics typical of telecom operators.
Their research highlights a striking 80% inverse correlation between daily moves in telecom stocks and the S&P 500 when the index shifts more than 1%—observed over the past 40 trading sessions since February.

“Telcos are behaving as volatility hedges, though not all players are benefiting equally,” the analysts noted.

Performance Divergence Within the Sector
Despite the sector’s overall strength, stock-specific fundamentals remain critical. During the 2022 Fed tightening cycle, the S&P 500 declined nearly 25%. Yet:

Verizon dropped over 30%, reflecting weak forward guidance and subscriber losses.

T-Mobile rose by ~15%, supported by robust subscriber growth and a strong 5G rollout.

This divergence underlines Bernstein’s caution that “picking the right horse matters.”

Defensive, but Not Without Risk
Telecom earnings per share have historically been more stable in downturns, reinforcing the sector’s reputation as a defensive play. Valuation multiples for telcos also tend to contract less—or even expand—during market stress.
However, Bernstein warns of sector-specific headwinds in 2024, including:

Slowing subscriber growth in both wireless and broadband.

Increased competitive pressures due to limited net additions.

Rising capex requirements for network upgrades.

These challenges could weigh on margins and limit upside during economic recovery periods.

Bernstein’s Stock Ratings & Price Targets
Bernstein’s current outlook on major U.S. telecom stocks:

AT&T: Outperform, with a price target of $29

T-Mobile: Market Perform, target $265

Verizon: Market Perform, target $46

While the sector remains a potential defensive allocation, the firm stresses that stock selection based on fundamentals and competitive positioning will be key going forward.

Related Market Intelligence

? Company Rating – Use this to analyze institutional ratings and scoring models assigned to telecom stocks based on valuation, growth, profitability, and financial strength.

? Earnings Historical – Explore quarterly and annual EPS trends to compare how telecom earnings have held up across different market cycles.