After the setback seen last week in the FTSE 100, there are increasing doubts about which sectors can buck the trend in such situations.
Some analysts think that defensive holdings, such as Diageo and Unilever, could be running out of momentum.
It is unusual that such consumer durable, lower volatility shares can outperform here in the UK, when the US is in the middle of a bull market.
It implies that investors are not yet confident that an economic recovery is under way. However, with few relatively predictable equity investments for investors, it is not surprising that they are seeking companies with dependable cash flows and earnings.
It seems that at the very least these sectors’ out-performance could have been attributed to a re-rating by investors. Especially so when they are regarded as alternatives to bonds which on the whole have given the best return for a decade of all the major asset classes.
With the prices of bonds now starting to fall, it seems some are starting to consider these equities in the same light. Strong though such businesses might be, they are not immune from competitive forces,which we are already seeing, when they are reporting their emerging market sales.
It is therefore reasonable to think that they will underperform their cyclical cousins when the global economy recovers. As signs of this are already in place, it is not surprising that doubts are arising about defensive holdings.
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