Defensive stocks outperform amid market struggles

The stock market has faced challenges in the past month, but some sectors are standing out positively. Investors are currently focusing on utility, health care, real estate, and financial sectors, which have shown strong performance during this time. Despite the overall decline of more than 5% in the S&P 500 index, certain stocks are up at least 10%. This trend reflects a preference for defensive investments, which tend to perform better in uncertain economic conditions. Art Hogan, a market strategist, noted that sectors focused on dividends have been particularly successful. For example, the utility company AES has increased by 23% this month and offers a dividend yield of 5.4%. Similarly, Allstate, an insurance provider, is up 11%, with a dividend yield of 1.9%. Hogan explained that in a risky environment, investors tend to look for safer options, which has been a consistent trend this year. Looking ahead, Hogan does not expect a return to riskier investments until there is more clarity regarding trade policies. He believes that the current defensive strategy will likely continue into the second quarter of the year. Ross Mayfield, an investment strategist, pointed out that low interest rates have made dividend stocks more appealing to investors. As yields on Treasuries decrease, income from dividends becomes more attractive. He also mentioned that sectors like utilities and health care are expected to have strong earnings growth in the coming quarters. In a challenging economic environment, Mayfield suggested that successful companies will be those able to grow their earnings. Health care, utilities, and technology are anticipated to be key leaders in earnings growth for 2025.