Amid escalating trade tensions, investors are gravitating towards defensive stocks, echoing strategies from previous trade conflicts. These stocks, known for their stable earnings and dividends, have gained favor as economic uncertainty looms. In the past three weeks, defensive companies within the S&P 500 have seen gains of approximately 2.4%, contrasting with a 1.2% decline in their cyclical counterparts. This trend mirrors the market behavior during the initial trade war under President Trump, where defensive stocks outperformed the broader index significantly.
Julian Emanuel, chief equity and quantitative strategist at Evercore ISI, advises investors to focus on "trade-war heroes" such as H&R Block, Cigna, and Apple, which are characterized by low volatility and high buybacks. These stocks are perceived as safer bets amidst the market's volatility, driven by tariff-related headlines. The preference for defensive stocks is further bolstered by their resilience to trade-induced market swings, making them attractive during periods of heightened economic uncertainty.
The S&P 500 Index is currently trading at 6,031.72 as of 11:10 on February 5, slightly down from its last close of 6,037.88. The index opened at 6,020.45, with an intraday high of 6,032.94, reflecting the ongoing investor shift towards defensive sectors amidst trade war concerns.