Defensive stocks are playing an increasing role in the market rally and this may be a bad sign

This stock market rally to records is starting to look shaky.

The S&P 500 touched a record on Tuesday ahead of an expected rate cut from the Federal Reserve, but looking under the hood, investors are increasingly flocking to one of the safest pockets of the market — defensives.

Health care stood out as the best-performing sector on Tuesday, lifted by Pfizer, Merck and HCA’s earnings beats. Consumer staples and real estate stocks also outperformed. However, growth and more cyclical names — tech, communication services and consumer discretionary — have started to show signs of weakness.

“The S&P 500 is back at all time highs but with even greater defensive leadership it may warrant investor caution with respect to a growth reacceleration,” Mike Wilson, Morgan Stanley’s U.S. chief equity strategist, said in a note to clients.

Investors know it all too well that record highs have barely been an all-clear sign. Just days after the S&P 500 last hit a record on July 26, stocks took a big hit on the escalated U.S.-China trade war and recession scares. The trade uncertainty is still a top-of-mind concern for investors as the two countries have yet to offer a clear path to a long-term resolution.

Source: CNBC

 Trader Georgi Bozhidarov

Read more:
If you think, we can improve that section,
please comment. Your oppinion is imortant for us.
WARNING: Any news, opinions, research, data or other information contained within this website is provided as general market commentary and does not constitute investment or trading advice. Varchev Finance Ltd. expressly disclaims any liability for any lost principal or profits which may arise directly or indirectly from the use of or reliance on such information. Varchev Finance Ltd. may provide information, quotes, references and links to or from other sites and blogs and other sources of economic and market information as an educational service to its clients and prospects and does not endorse the opinions or recommendations of the sites, blogs or other sources of information.
Varchev Finance