Investing.com -- U.S. telecom stocks tend to outperform the broader market during periods of heightened volatility, but returns can vary widely depending on fundamentals, Bernstein said.

AT&T (NYSE: T ), Verizon (NYSE: VZ ) and T-Mobile have all outperformed the S&P 500 year-to-date and are trading at the upper end of their post-COVID range, with T-Mobile reaching a record high.

Bernstein attributed the strength to a shift by investors toward perceived safe havens amid macro uncertainty.

Over the past 40 trading sessions, Telco stocks moved in the opposite direction of the S&P most of the time when the market shifted by more than 1%, analysts wrote, citing an 80% inverse correlation in daily moves since February.

Still, results differ sharply between companies.

During the Fed’s rate hikes in 2022, the S&P fell about 25%, but Verizon dropped over 30% while T-Mobile gained roughly 15%, driven by divergent outlooks.

Picking the right horse matters, the analysts said.

Telecom (BCBA: TECO2m ) earnings per share have generally held up in past downturns, supporting the sector’s reputation for resilience.

Bernstein also noted that valuation multiples for telcos tend to expand—or contract less—during market stress, though they lag behind in recoveries unless backed by strong fundamentals.

“Besides the macro uncertainties this year, there are also sector-specific challenges that companies need to navigate - such as limited net adds in both wireless and broadband - potentially leading to a more competitive market environment,” analyst at Bernstein said.

While the sector can serve as a defensive play, competition and weak subscriber growth remain headwinds.

Bernstein maintains an “Outperform” rating on AT&T with a $29 price target, and “Market-Perform” ratings on T-Mobile and Verizon, with targets of $265 and $46, respectively.