Source: Wall Street See
Author: Huang Wenwen
Analyst Jim Paulsen said that economic downturn obviously leads to defensive stocks outperforming the large cap, while strong economic growth instead causes them to underperform. So far this year, the stock price of defensive stock Coca-Cola has risen by about 20%, while Colgate-Palmolive has risen by over 30%.
Due to growing concerns about the US economic recession, market risk aversion is increasing, and investors are actively seeking a safe haven for their funds.
In recent weeks, the consumer staples sector in the US has shown strong performance, with defensive stocks coca-cola (KO.US) and $Colgate-Palmolive (CL.US)$ Being a new favorite of investors.
Coca-Cola and Clorox performed well.
Year to date, Coca-Cola's stock price has risen by about 20%, while Clorox has surged by over 30%. And in the past month, retailers$Walmart (WMT.US)$Target and consumer goods manufacturers$Clorox (CLX.US)$'s stock prices have risen by 14.8%, 9.1%, and 15.6%, respectively, far exceeding the same period$S&P 500 Index (.SPX.US)$A moderate increase of 4.5%.
Irene Tunkel, Chief U.S. Stock Strategist at BCA Research, said:
"Historically, defensive stocks like consumer staples have performed well before the Federal Reserve's first interest rate cut, and the Federal Reserve usually cuts rates when there is enough evidence of an economic downturn. If market optimism returns, consumer staples are likely to underperform."
Last week, Morgan Stanley added Coca-Cola and Clorox to its list of recommended stocks, advising clients to focus on "defensive companies that prioritize operational efficiency or have sustainable pricing power, or a combination of both." These types of companies tend to maintain stable performance during economic downturns.
The rise of the "resilient" consumer staples industry
Bloomberg data shows that$The Kraft Heinz (KHC.US)$,$Procter & Gamble (PG.US)$The American consumer goods sector, including well-known brands like Walmart, has outperformed the blue chip index for six of the past eight weeks. Last week, the consumer goods index reached its highest level since March 2020 relative to the blue chip index, but has since pulled back.
This achievement marks an expansion of this year's stock market rebound, which was previously driven mainly by large technology stocks. Now, the market is starting to have concerns about a slowdown in profits for previously dominant technology stocks. At the same time, as cracks appear in the US labor market, it has sparked market divergences on the extent to which the Federal Reserve should lower interest rates and concerns that the US could soon enter a recession.
Jim Paulsen, former chief strategist and analyst at Leuthold Group, said,
"Clearly, during an economic recession, defensive stocks outperform the overall market, while strong economic growth leads to their underperformance."
Capital trend data collected by Deutsche Bank shows that investors' positions are currently "inclined towards" defensive stocks in the bond category, including consumer goods, real estate, and utilities.
It is worth noting that the consumer goods industry often lags behind the market during a bull market, but catches up during an economic downturn. The industry performed well during the sell-off period in 2022, but performed poorly during the second half of 2023 when the expectation of a "soft landing" dominated.
Kevin Gordon, senior investment strategist at Charles Schwab, said,"In recent weeks, investors have realized that they were too aggressive on defensive stocks last year. Consumer goods declined in the first year of this bull market, consistent with the recent expansion of the stock market rebound."
Editor/rice