NEW YORK, Sept 3 — Fresh volatility in US stocks is pushing some investors to hunker down in areas of the market that have been relatively strong during a brutal year for equities, including energy shares, defensive names and dividend-payers.
Sectors such as consumer staples, healthcare and utilities have fallen less steeply than the broader S&P 500 throughout the year. Investors tend to gravitate toward companies in these areas during uncertain times, expecting consumers to continue spending on medicine, food and other necessities despite economic turmoil.
“Those type of ‘steady-Eddie’ names could tread water in a downward sloping market,” said Chad Morganlander, portfolio manager at Washington Crossing Advisors, who manages a strategy involving companies he expects to increase dividends in the months to come, including Johnson & Johnson and Clorox Co.
A swift rebound in bond yields has further complicated the outlook for equities, putting technology and other growth stocks that are more sensitive to rising yields under particular pressure. Worries that the Fed will struggle to tamp down inflation — which surged at its highest pace in more than four decades this year — have been another catalyst for investors to diversify. A rise of about 20 per cent in Brent crude has helped make energy shares a particular favourite this year, while also putting upward pressure on consumer prices.
Of course, areas that have outperformed this year come with their own risks. Energy prices have been volatile and could slide should a recession crimp global demand, pressuring energy stocks.