(Reuters) Utilities sector has returned over 6% this year, while staples have gained 2.5%, against a general 8% decline in S&P 500 as investors turn defensive in a tighter economy.
Other defensive sectors, including healthcare and real estate, have dipped by lower margins this year compared to the S&P 500 and so far, posted gains in April.
The gains in the so-called defensive sectors happen as investors become worried of the growing geopolitical uncertainty and expectations of Fed’s policy tightening.
Wall Street believes that the defensive sectors can overcome the turbulent times while also offering strong dividends. Defensive names are also seen as strong options in hedging against inflation which has been surging recently.
Investors have grown concerned over a potential recession in the US since the short-term yields on some government bonds climbed above the longer-term ones.
Walter Todd, chief investment officer at Greenwood Capital, says defensive stocks are becoming attractive due to the headwinds the economy faces.
Investors are betting on historical data, which shows that the defensive sectors have outperformed the S&P 500 by about 15 to 20 percentage points during times of economic uncertainty.
Despite the focus on defensive names, Mona Mahajan, senior investment strategist at Edward Jones, believes momentum could shift quickly if it appears that the economy will stay strong.
SPY is down -1.25%, Nasdaq 100 is down -2.28%
