How to combat decline? Investors: Take a look at Coca-Cola and Colgate.

Due to increasing concerns about the US economic recession, market risk aversion sentiment is rising, and investors are scrambling to find a "safe haven" for their funds. In recent weeks, the US consumer staples sector has been strong, with defensive stocks like Coca-Cola and Colgate becoming the new favorites for investors. Coca-Cola and Colgate Shine So far this year, Coca-Cola's stock price has risen by about 20%, while Colgate has surged over 30%. In the past month, retailer Walmart, Target, and consumer goods manufacturer Clorox saw their stock prices rise by 14.8%, 9.1%, and 15.6% respectively, significantly outperforming the mild 4.5% increase in the S&P 500 index during the same period. Irene Tunkel, Chief US Equity Strategist at BCA Research, said, "Historically, defensive stocks like consumer staples perform well before the Federal Reserve cuts interest rates, which typically happens when there is sufficient evidence of an economic recession. If market optimism returns, consumer staples will start to underperform." Last week, Morgan Stanley added Coca-Cola and Colgate to its list of recommended stocks, advising clients to focus on "defensive companies that prioritize operational efficiency or have sustainable pricing power, or a combination of both. These companies often can maintain stable performance during economic recessions. The Rise of "Defensive" Consumer Staples Industry Bloomberg data shows that the US consumer staples sector, including well-known brands such as Kraft Heinz, Procter & Gamble, and Walmart, outperformed the blue-chip index in six out of the past eight weeks. Last week, the consumer staples index relative to the blue-chip index reached its highest level since March 2020, although it has since retreated slightly. This achievement marks an expansion of the stock market recovery range this year, which was previously primarily driven by large-cap tech stocks. However, there are now concerns about slowing profits in the previously dominant tech sector. Meanwhile, with cracks appearing in the US labor market, there is divergence in the market regarding the extent to which the Federal Reserve should cut interest rates and concerns about the possibility of the US slipping into a recession soon. Jim Paulsen, former Chief Strategist and Analyst at Leuthold Group, said, "An economic recession obviously leads to defensive stocks outperforming the broader market, while strong economic growth tends to result in underperformance for them." Data from Deutsche Bank shows that investors' positions currently "lean towards" defensive stocks in bonds, including consumer staples, real estate, and utilities. It is worth noting that the consumer staples industry often lags behind the market during bull markets, but catches up during economic recessions. The sector performed well during the sell-off in 2022 but poorly when expectations of a "soft landing" dominated in the second half of 2023. Kevin Gordon, Senior Investment Strategist at Charles Schwab, said, "In recent weeks, investors have realized they were too aggressive in defensive stocks last year. Consumer staples declined in the first year of this bull market, consistent with the recent broadening performance of the stock market rebound."