Positioning with Defensive Stocks

Sébastien Galy, Sr. Macro Strategist Nordea Asset Management  


With US consumption starting to come unstuck, investments fading and CEO Conference Board confidence at an all-time low, the outlook for equities is less constructive and the cycle of Fed easing just started.

Earnings expectations for this quarter are so low that they are being revised up and those of upcoming quarters are widely expected to be revised down significantly. Nonetheless, we will very likely avoid a recession in advanced economies, while we expect China’s growth to bounce back within another two quarters. In such an environment of low earnings growth and excessive talk of recession, the outlook for equities is sideways with a mild positive trend as we are currently seeing with momentum buoyed by hopes of a trade deal between the United States and China.

Within equities, some sectors offer a better risk reward for this phase of the business cycle when value and defensive stocks typically outperform. An example of this is Listed Infrastructure, which has limited drawdowns compared to broader indices while still offering some decent performance. As a reminder, we continue to recommend holding a diversified and resilient portfolio.

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About Nordea Asset Management

Nordea Asset Management (NAM, AuM 229.1bn EUR*), is part of the Nordea Group, the largest financial services group in Northern Europe (AuM 313.8bn EUR*). NAM offers European and global investors’ exposure to a broad set of investment funds. We serve a wide range of clients and distributors which include banks, asset managers, independent financial advisors and insurance companies.

Nordea Asset Management has a presence in Cologne, Copenhagen, Frankfurt, Helsinki, London, Luxembourg, Madrid, Milan, New York, Oslo, Paris, Santiago de Chile, Singapore, Stockholm, Vienna and Zurich. Nordea’s local presence goes hand in hand with the objective of being accessible and offering the best service to clients.

Nordea’s success is based on a sustainable and unique multi-boutique approach that combines the expertise of specialised internal boutiques with exclusive external competences allowing us to deliver alpha in a stable way for the benefit of our clients. NAM solutions cover all asset classes from fixed income and equity to multi asset solutions, and manage local and European as well as US, global and emerging market products.

*Source: Nordea Investment Funds S.A., 30.09.2019

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