Bank of America warns: Defensive stocks in the U.S. market "turning over" indicate that the U.S. economy may not enjoy "good times for long."
Bank of America warns that defensive consumer staples and healthcare stocks have recently outperformed other sectors, suggesting that the U.S. economy may face challenges. The S&P 500 index has fallen 0.6% over the past month, while consumer staples and healthcare stocks have risen 6.8% and 2.6%, respectively. Bank of America strategist Michael Hartnett pointed out that signs of a slowdown in economic activity could lead to a disruption in the stock market bull run, and the risk of a slowdown in the U.S. economy is greater than the risk of rising inflation
According to the Zhitong Finance APP, Bank of America stated last Friday that the recent performance of defensive consumer staples and healthcare stocks has outperformed other sectors of the U.S. stock market, which is a warning signal for the U.S. economy. Data shows that the S&P 500 index fell by 0.6% over the past month, while consumer staples (XLP) and healthcare (XLV) sectors rose by 6.8% and 2.6%, respectively, during the same period. These two categories of stocks have been the best performers in the S&P 500 index over the past month.
Bank of America noted that the excellent performance of defensive and bond-sensitive stocks is beginning to indicate a slowdown in economic activity, and this economic shift could trigger a "disruption" in the stock market bull run. The bank's strategist Michael Hartnett stated that there are risks of "unexpected slowdown in real estate growth, weakening wealth effect and job growth, inflation affecting consumer confidence, and the U.S. government falling into recession."
Michael Hartnett mentioned that last year, discretionary spending by the U.S. federal government increased by 65%, which was a "significant reason" for the growth of U.S. nominal GDP, while the Trump administration is currently seeking large-scale spending cuts, which may include cuts to defense spending. He added that the risk of a slowdown in the U.S. economy is greater than the risks of rising inflation and the stock market breaking out of its trading range, as U.S. President Trump is "unlikely" to "stir up" inflation through significant tariffs and immigration cuts in the first half of the year
