Don’t Expect More of the Same

Brian Hilyard
Finance Section Editor

S&P 500 QTD (Photo courtesy of FINVIZ)

Defensive assets have taken center stage this quarter. The top S&P 500 sectors have been healthcare, real estate, and utilities. Utilities lead, up 10.2% so far. The thinking behind defensive stocks is that regardless of the economy’s health, people still consume the goods and services of these sectors.

The VIX also points to pessimism. The spread between the front-month futures contract and the index itself is near its widest point in the past 5 years. It’s clear that while we are still in a bull market, it has significant defensive undertones.

Despite this, the S&P 500 is trading at 21.3x next-12-month’s earnings, a 35% premium to the 20-year moving average.

Even when looking abroad, it seems as if global investors are becoming more cautious. The Japanese yen and Swiss franc (widely regarded as safe havens) have outperformed most of their G10 peers this quarter.


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