According to Zhito Finance APP, the stock strategy team from an international major bank advises global investors to reduce their holdings in cyclical stocks and suggests focusing on performance growth-oriented defensive stocks (i.e., 'growth defensive stocks').$UBS Group (UBS.US)$UBS Group's Chief Global Equity Strategist Andrew Garsweth stated in a report: 'The pricing of cyclical stocks reflects very high global PMI benchmark expectations, and both the PE and PB ratios relative to defensive stocks are close to historical highs.'

The UBS team led by Gathright stated that major bullish news at the cyclical level—such as the Federal Reserve's interest rate cut cycle, the European Central Bank and Bank of England's interest rate cut cycles, and expectations of the Chinese government's fiscal policies—has already been reflected in the pricing of the stock market, and shared concerns about UBS's strategy team's perspective that current market preferences favor high-risk cyclical Stocks over defensive Stocks.

'First, the cyclical profit margins in many Industries are at historical highs. Furthermore, market pricing implies that the profit margins of cyclical Industries will remain at an 'abnormally high' level relative to defensive Industries, which is not good news for cyclical Stocks,' stated the UBS stock strategy team.

In this latest Research Report released by UBS, it was also mentioned that cyclical Stocks seem to be aggressively priced globally, especially given the sharp rise in PMIs in Europe, but UBS forecasts that global economic growth rates will significantly slow (from 3.2% in 2024 to 3% in 2025 and 2.7% in 2026). UBS also pointed out that even the 'exceptional growth of the US economy,' which is supported by some investment Institutions, is expected to slow significantly, possibly dropping from a year-on-year growth of 2.7% in the third quarter to 1.7% year-on-year growth in the third quarter of next year.

'Furthermore, global stock market earnings corrections still tend to be downward rather than upward, and cyclical Industries are expected to be adversely affected up to 65% of the time,' stated the UBS team led by Gathright.

UBS stated that the steepening trend of the yield curve guided by short-term interest rates, as well as the significantly increased likelihood of a 'soft landing' for the US economy, will support growth-oriented defensive Industries, including pharmaceuticals, Software, telecommunications, and Housewares.

UBS Group also stated that from the perspective of Historical Data, the best time to buy cyclical Stocks is when the volatility of the benchmark Index is very high, because when this happens, the performance of cyclical Stocks lags over 83% of the time, or when they show signs of being oversold technically, only then do cyclical Stocks have the so-called "excess return allocation value."

What UBS Group refers to as "performance growth defensive stocks," are those stocks that have both a long-term expectation of sustainable performance growth and possess "defensive characteristics" in a bear market. These companies often have strong resilience to economic pressure, growth potential, solid financial conditions, and relatively low volatility, focusing on pharmaceutical companies, Medical Devices companies, essential Consumer goods companies, retail giants, Public Utilities companies (primarily Electrical Utilities and Water Affairs), and Cloud Computing giants (such as$Microsoft (MSFT.US)$、$Amazon (AMZN.US)$And$SAP SE (SAP.US)$UBS Group's Chief Global Equity Strategist, Gareth Wheat, listed the following stocks in a research report as references for investors in stock selection.

UBS Group selected "defensive stocks with earnings growth potential": large industrial companies, such as$Mitsubishi Heavy Industries (7011.JP)$、$BAE SYSTEMS (BAESF.US)$; condiment and spice companies, such as$SYMRISE AG (SYIEY.US)$and DSM-Firmenich; medical technology companies, such as$Abbott Laboratories (ABT.US)$With Allergan; companies in the power distribution and transmission sector, such as E.ON and the National Grid of the United Kingdom,$PG&E Corp (PCG.US)$And$Sempra Energy (SRE.US)$; involving electricity pricing services and power supply exposure companies in the USA, such as Vistra and$Talen Energy (TLN.US)$; software giants or Saas software companies, such as SAP and Microsoft; retailers, such as the well-known food retailer Tesco from the United Kingdom; and European telecom giants, such as Telenor.

Currently, almost all Wall Street bears have turned bullish, with only a few Institutions remaining bearish on US Stocks. Recently, Barry Bannister, Chief Investment Strategist at investment firm Stifel, stated that by the end of 2025, US Stocks will be lower than their current levels, making Stifel arguably Wall Street's "last bear." In a recent report to clients, Bannister wrote, "The current inflation environment seems unfavorable for a sustained stock market frenzy, and we are more inclined towards some defensive Industries." He added that an economic slowdown will benefit defensive Stocks, particularly including Medical Care, Utilities, and essential Consumer goods Stocks.

Additionally, although Wall Street institutions generally mention in their Research Reports that the overall trend of the US stocks is expected to continue rising to new historical highs next year, $S&P 500 Index (.SPX.US)$there may still be occasional periods of about 10% corrections and relatively short consolidation phases. Looking at the Global Equity market, a similar fluctuating performance may occur in 2025, and in a volatile environment, growth defensive stocks often significantly outperform the Large Cap benchmark. This is why institutions like UBS Group and Morgan Stanley are bullish on US stocks in 2025 while also favoring defensive stocks. The Morgan Stanley strategy team stated that defensive stocks typically continue to perform well for 3 to 12 months after the Federal Reserve's first interest rate cut.

Editor/ping