According to analysts, growth potential in protective sectors remains.
What investors are afraid of
In early April, Bank of America surveyed about 300 asset managers.. According to the results, 83% of respondents are apprehensive, that a sharp tightening of policy FED The United States will provoke a global recession in the economy.
It is the soft policy of regulators that has stimulated steady growth in the stock market over the past two years.. To beat the record for 40 years inflation rate, The Fed will have to significantly change its course.
Higher Fed interest rates will make loans more expensive. Then consumers – the main driver of economic growth – will begin to spend less.. The profit of companies will also decrease due to the growing costs of servicing loans.. All this will have a bad effect on the value of shares..
Inflation problems exacerbate non-monetary causes. The situation in Ukraine is accelerating commodity prices, and the COVID-19 outbreak in China is causing even more disruption to supply chains..
Investors are afraid, that the Fed at the next meetings will raise the rate immediately on 50 basis points. These concerns can be seen in the bond market.: 1 April yield short, two-year Treasury bonds exceeded the yield of long, 10-Summer. History shows, that usually the yield curve inverts a few months before a recession.
Who grows better than the market
Not just debt, but also stock market reflects investors' concerns. From the beginning of 2022, the semiconductor industry, transport and banking, the main barometers of the state of the economy, have already fallen by 10-20%.. S&The P 500 lost less over the same period — about 8%.
At the same time, recession-resistant sectors, which sag less in times of economic downturns, bypass the wide market this time. So, healthcare, essential goods and utilities show profitability for the last year on 10 percentage points above, than S&P 500: 16 against 6%.
According to the analytical company DataTrek, growth potential in these three sectors still remains. The company has calculated, that in the latter 20 years they overtook the S&P 500 in periods of uncertainty by 15-20 percentage points per year.
But individual security papers may already be expensive.. According to Bespoke Investment Group, 90% Shares, which updated the annual maximum in early April, were from the defensive sectors. This means, that individual stocks should be selected based on the current price, and not just on an industry basis.
Profitability of sectors and S&P 500 from the beginning of 2022
| Oil & Gas | +43,7% |
| Utilities | +6,3% |
| Essential goods | +2,5% |
| healthcare | −1,7% |
| Raw materials | −1,8% |
| Industry | −5,5% |
| Finance | −5,6% |
| The property | −6,1% |
| S&P 500 | −7,8% |
| Goods of second necessity | −12,7% |
| Information Technologies | −15,7% |
| Communication services | −16,3% |
+43,7%
