A defensive battle amidst rising voices! U.S. stock traders quietly build a breakwater in the "false rebound"

According to Zhitong Finance APP, the US stock market has rebounded from the lows of this month’s sharp decline, but a closer look reveals that traders are significantly increasing their allocation to safe-haven assets in their portfolios.

Although the announcement by US President Trump to suspend tariffs on most goods for 90 days initially stimulated funds to flow into the riskiest areas of the market, investors who chose safe sectors ended up with better returns.

Data tracked by Barclays Bank shows that on days when the market rises, defensive stock portfolios generally outperform those of companies highly tied to the economic cycle; when market sentiment deteriorates, defensive sectors still outperform cyclical stocks.

A similar trend can also be observed from the comparison of financially healthy and weak companies. When the tariff suspension news was announced on April 9, both types of stocks saw double-digit rebounds. However, since then, the stock prices of the financially weakest companies have fallen by 3.3%, underperforming those with healthier balance sheets.

This defensive preference highlights that the current market rebound has yet to form a risk appetite sentiment, making it difficult to support a sustained rise.

Keith Lerner, Co-Chief Investment Officer at Truist Advisory Services, stated, “The market is shifting towards traditional defensive strategies.” Allocating to defensive sectors “is a way to hide in the storm until investors see a clearer outlook.”

Lerner mentioned that he had overweighted utility stocks weeks ago, as this sector is less affected by tariffs. He added that this is part of his overall reallocation towards defensive assets.

Sectors such as utilities, consumer staples, and healthcare tend to be the most resilient during economic downturns, providing stable earnings and relatively smooth returns. Data from Bank of America on April 15 also showed that since the market crash began, funds have continued to flow into defensive areas such as materials and healthcare.

Manish Sinha, Executive Director at JP Morgan Securities specializing in equity factors and macro strategy sales and trading, stated in a report to clients on April 16 that the tilt towards defensive companies reflects a change in market behavior and risk-return dynamics.

This shift is particularly evident in the artificial intelligence sector—these growth engines of the past two years have recently plummeted, with the stock prices of Nvidia (NVDA.US) and AMD (AMD.US) hindered by tariff developments, while ASML (ASML.US) disappointing earnings further dampened market sentiment.

Dave Mazza, CEO of Roundhill Investments, stated, “Companies in high-growth areas are struggling because their fate is temporarily out of their control. Investors are preparing for more market turbulence by shifting towards defensive sectors.”