Investors in US stocks, worried that geopolitical uncertainty and the Fed's measures to fight inflation will undermine economic growth, are turning to defensive industries that are better able to weather volatile times and tend to offer strong dividends.

The health care, utilities, consumer commodities and real estate sectors have all risen so far in April, and although the broader market has fallen, it continues to outperform the S & P 500 this year.

Defensive industries have been particularly attractive in recent months as investors worry that the Fed will stifle the US economy as it tightens policy aggressively in response to soaring consumer prices. that is, the Fed's aggressive measures could lead to a recession as they struggle to deal with the economy.

The US bond market sent a worrying signal last month that some maturing government bonds had higher short-term yields than long-term yields.. This phenomenon, known as the reverse yield curve, occurred before past recessions.

The s & p 500 fell nearly 8% in 2022, utilities rose 6%, office supplies rose 2.5%, health care fell 1.7%, and real estate fell 6%.

As next week's earnings season enters its best partThe reports of defensive industry companies include health care giants Johnson & Johnson, Staples and Procter & Gamble Co. Investors will also be watching the earnings of streaming giant Netflix and electric car maker Tesla, Inc..

The Fed, which raised interest rates by 25 basis points last month, has said it is prepared to raise rates more sharply and quickly ease its nearly $9 trillion balance sheet to reduce inflation. Investors are also unnerved by geopolitical uncertainty over the situation in Ukraine, a war that has pushed up commodity prices and helped boost inflation.

Mona Mahajan, senior investment strategist at Edward Jones, saidAs prices soar, defensive stocks may also be "some kind of inflation hedge".

Art Hogan, chief market strategist at National Securities, believes that the probability of a recession in the United States this year is 35%, "but this is not our basic situation."

The surge in defensive stocks has pushed up their valuations. The utility sector trades at 21.9 times forward earnings, the highest on record and well above its five-year average of 18.3, according to Refinitiv Datastream. The office supplies sector is about 11% higher than its five-year average forward price-to-earnings ratio, while the health care sector is 5% higher.