Latest news with #defensivesectors
Yahoo
25-07-2025
- Business
- Yahoo
Cyclical vs. defensive stocks: Here's how to invest
Cyclical stocks are soaring while defensives lag behind in the S&P 500's (^GSPC) rally. Yahoo Finance Markets and Data Editor Jared Blikre, who also hosts Yahoo Finance's Stocks in Translation podcast, explains how investors can play both sides using sector exchange-traded funds (ETFs). Catch more Stocks in Translation here, with new episodes every Tuesday and Thursday. To watch more expert insights and analysis on the latest market action, check out more Market Catalysts here. The S&P 500 is up nearly 30% off the April lows and Wednesday we took a look at cyclicals versus defensive sectors and how those poor defensive have gotten no love recently. Today I'm going to show you how to play these two different groups with an introduction and a way to enhance your portfolios with commodity futures. But first, let's do a brief recap of some of the basics that we covered yesterday. First, we want to take a look at the defensive sector definition. These are industries whose demand stay steady in booms or busts so that earnings and share prices move less with the economy. They're stable, in other words. And these we have four sectors, consumer staples, we have healthcare, utilities, and energy, and yes, energy is kind of a gray area, but we talked about that yesterday. Now we also have the cyclicals. These are industries and groups whose sales and profits swell in economic expansions, they shrink in recessions, and that makes their stocks swing more than the general market. And here we have the remaining seven sectors, uh, large cap sectors, at least that we define the S&P 500 by, consumer discretionary, industrials, materials, financials, tech, communication services and real estate. And yes, there are some gray areas there too, especially with tech and communication services, but we move on. I just wanted to show this chart again too because I think it's so incredible. This goes back to 1990 and this shows you the defensive sectors, how much they took up as part of the S&P 500, they started out at 40% in 1990. They moved up a little bit, but now they are at 20%. And then you took take a look at two stocks only. This is Nvidia and Microsoft and they are now taking up 15%. So this just this just illustrates how much these stocks have become unlove, those defensive sector stocks. So as promised, I'm going to show you some ETFs on how to play. And by the way, a lot of this work comes from Todd Sohn over at Strategas ETF Research, and these are his basket years. So here we have a bunch of cyclical ETFs starting with ARKKQ. That is the Arc autonomous and, uh, innovation fund, not the innovation, the Arc autonomous and robotics fund. That is up over 66%, that's twice what the S&P 500 is up. And then we have two, uh, ETFs that cover the semiconductors, socks, which you might know, and XSD. Both of those are also up almost 2x, the S&P 500. Then we have high beta. That's up 50%. What is beta? That's almost like the stock trading at a multiple of the general market. So a beta of two is twice what the S&P 500 is doing. Those are doing well, those are cyclicals. And then it's interesting, we have a broker-based ETF. That's up 43%. Uh, and here's the year to date, still holding on the gains of 21%. So we do have financials in there. Then we have another one, KBW Bank Index. That's another financial driven one. Then we've got some other interesting ones. We've got Pave, which is infrastructure, and also we have IWM down there. You might know that as the Russell 2000 ETF. So that's a very cyclically oriented index, um, and you can also break that up into groups. But we got to get to some of our defensives here. So, PKW is a buyback fund and so the top two in there, I believe are Wells Fargo and PayPal. And yes, this is a defensive, but two of those stocks are arguably cyclical. So it just goes to show you some of the gray area that we're dealing with here, but, uh, stocks that can do strong buyback programs, they have to, they have a bit of defensiveness worked into them. Also, we have the RSP. That is the S&P 500 equal weight ETF. Since the market cap ETF is so highly weighted to those big stocks, uh, this one is arguably a bit more defensive. You can see that's up 7% year to date. Then we have cows. This is a cash cows ETF. Um, you'll see stocks like Nike and Ford at the very top of that. The theory being that cash flows, those strong cash flows make those stocks a little bit more defensive, even though a lot of times they're classified as cyclical. At the very bottom, the worst performer, XLV. That is a standard Spider Healthcare ETF for large cap healthcare and pharmaceuticals. That's only up about 2.2% since the April bottom. And it looks like I'm out of time here, so I'm going to have to show you how to add managed futures to your portfolio and help balance it tomorrow. But I do promise to do that. In the meantime, tune into the Stocks and Translation Podcast for more market decoding deep dives. New episodes can be found Tuesday and Thursday on Yahoo Finance's website or wherever you find your podcast.
Yahoo
20-06-2025
- Business
- Yahoo
Traders Resist Defensive Stocks' Haven Status Amid Mideast Risk
(Bloomberg) -- US equities investors are reluctant to seek safety amid flaring geopolitical tensions, raising the risk of getting caught off guard if the conflict between Israel and Iran takes an unexpected turn in the days ahead. Security Concerns Hit Some of the World's 'Most Livable Cities' One Architect's Quest to Save Mumbai's Heritage From Disappearing JFK AirTrain Cuts Fares 50% This Summer to Lure Riders Off Roads NYC Congestion Toll Cuts Manhattan Gridlock by 25%, RPA Reports Taser-Maker Axon Triggers a NIMBY Backlash in its Hometown Normally, this level of anxiety would be enough to send money managers scurrying into stocks offering shelter, especially with President Donald Trump weighing whether to offer Israel military backing in its conflict with Iran. That step could roil crude prices and stoke worries about inflation, and potentially reignite a rush for investment havens. Yet, the events since last week have only triggered a modest shift into so-called defensive sectors such as utilities, consumer staples and health care. That's even as US stocks whipsaw their way higher, with the S&P 500 Index is just 2.7% away from a new all-time high. For Matt Maley at Miller Tabak + Co., it's an ominous setup that leaves investors vulnerable given the fluid situation. 'The war may or may not get worse, but given that any upside potential for stocks is limited due to extended valuations, investors should be taking more precautions,' said the firm's chief market strategist. Underscoring how safer stocks have been on the sidelines lately, defensive sectors' influence on the benchmark — measured by the combined weight of the groups in the gauge — is currently at a 35-year low, Strategas' Todd Sohn found. What's more, a Goldman Sachs Group Inc. pair-trade basket that represents going long cyclicals and short defensives has seen a modest uptick since Israel launched airstrikes against Iran's nuclear program and military targets last week. If traders were rushing to safety due to concerns over the economy the basket would decline, like it did in early April, when investors feared the impact of tariffs on growth. Trump will decide within two weeks whether to strike Iran, his spokeswoman said on Thursday. Reluctance Explained Some say there's good reason for investors to be reluctant to jump into defensives in the face of geopolitical unrest. First, data from UBS shows the impact of such events on equity markets tend to be short-lived. In the past 11 major geopolitical events, the S&P 500 on average fell just 0.3% one week after the event, while 12 months later it rose 7.7%. According to Christopher Murphy, co-head of derivatives strategy at Susquehanna, positioning among hedge funds remained light. In other words, many institutional investors did not aggressively chase the recent rally higher, limiting their need for a forced pivot on geopolitical shocks. Even on the day of strikes, investors showed little fear of a volatility breakout, and were adjusting their exposure and not exiting markets, the strategist said. 'Investors are still hedging with precision, but the dominant behavior remains risk-adjusted engagement — not panic,' he said. Putting Up Guardrails That may be the case but there's one outlier trade. Investors are piling into energy stocks, which tend to behave defensively in times when crude oil supply is at risk. Any escalating Iran-Israel conflict could push oil prices even higher. Meanwhile, some market pros are starting to advise investors to make a bigger defensive move. The Wells Fargo Investment Institute recommended boosting exposure to such stocks amid the uncertainty surrounding tariffs that will extend through the rest of the year. The utility sector stands out to Wells Fargo strategists. The group, which can act as a hedge against market volatility and economic risks, is relatively shielded from tariffs given the businesses are primarily domestic, they wrote in a note. Utilities are also set to benefit from the infrastructure buildout in artificial intelligence. Moreover, valuations are relatively favorable, they added. The S&P 500 Utilities Index is trading at a forward price-to-earnings multiple of 17 times, compared to the S&P 500's 22 times. Dennis DeBusschere at 22V Research said he won't be buying any surge in defensives, given the firm's view that Israel will not strike Iran's oil exporting facilities, thereby limiting the impact on interest rates and inflation expectations. Ken Griffin on Trump, Harvard and Why Novice Investors Won't Beat the Pros Is Mark Cuban the Loudmouth Billionaire that Democrats Need for 2028? The US Has More Copper Than China But No Way to Refine All of It Can 'MAMUWT' Be to Musk What 'TACO' Is to Trump? How a Tiny Middleman Could Access Two-Factor Login Codes From Tech Giants ©2025 Bloomberg L.P.
