Wall Street renowned bear: Investors should lock in defensive stock gains and wait for clearer employment data.
Daiwa has a neutral stance on so-called defensive stocks related to cyclical sectors of the economy. They are waiting for "clearer" employment data, as the bank believes employment data is a key driver for the stock market at the end of the year.
Morgan Stanley strategist Michael Wilson said that investors should lock in the profits of defensive stocks in the United States, as their recent strong performance has made their valuations look high.
Wilson's team has a neutral stance on so-called defensive stocks related to economic cyclical sectors and is waiting for "clearer" employment data, which the bank believes is a key driver of the year-end stock market.
The bank's strategist wrote in a report, "It makes sense to take profits from the recent strong performance of defensive stocks without knowing the outcome of the next labor report."
In recent months, investors have flocked to stocks perceived to be less affected by economic downturns, such as healthcare and utilities, due to concerns about a U.S. economic recession. Since the end of June, a basket of defensive stocks from Citigroup has risen by about 11%, outperforming the 8.5% increase of the cyclical stock index.
However, last week's first interest rate cut by the Federal Reserve in four years helped alleviate concerns about economic growth, with the S&P 500 index hitting a record high after the rate cut decision. Traders expect more accommodative policies before the end of the year.
The Morgan Stanley team stated that defensive stocks usually have a "mild" performance in the month following the first interest rate cut by the Federal Reserve. However, they believe that defensive stocks will continue to perform well in the 3 to 12 month timeframe.
Wilson is one of the most notable bearish stock market analysts until mid-2024. In Monday's report, he reiterated his preference for large cap stocks with strong earnings prospects.
Other market strategists from firms like Citigroup and Barclays are more optimistic about the outlook for cyclical stocks, especially in Europe. Sectors such as automotive manufacturing and retail, which are more sensitive to macroeconomic factors, make up a large part of the benchmark index in the region.
However, JPMorgan strategist Mislaaf Matejka said that despite expectations of lower bond yields, downgrades in profit ratings, and "unattractive valuations," he remains bearish on European cyclical stocks.
Related Articles

Report: NVIDIA's H20 inventory is limited and there is no plan for production recovery.

Japanese Senate election speculation: The yen and Japanese bonds are like a startled bird, how will the market react?

Survey: Most respondents expect that Powell will retire before his term ends, which could either lead to him stepping down early or causing a huge shockwave.
Report: NVIDIA's H20 inventory is limited and there is no plan for production recovery.

Japanese Senate election speculation: The yen and Japanese bonds are like a startled bird, how will the market react?

Survey: Most respondents expect that Powell will retire before his term ends, which could either lead to him stepping down early or causing a huge shockwave.

RECOMMEND

For the Third Consecutive Month, China Reduces U.S. Treasury Holdings by $900 Million in May, While Japan and the United Kingdom Increase Holdings
18/07/2025

Tariff-Driven Inflation Arrives with Delay as U.S. Consumers Begin to Feel the Initial Pinch
18/07/2025

Multiple Countries in High-Stakes Talks with the U.S.; EU Considers Invoking “Anti-Coercion Tool” as U.S. Plans Unified Tariffs on 150 Nations
18/07/2025