LIVE MARKETS-Time to 'defend' your portfolio with defensive stocks

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TIME TO 'DEFEND' YOUR PORTFOLIO WITH DEFENSIVE STOCKS

As global financial markets navigate President Trump's back-and-forth tariffs, analysts say investors should seek shelter in defensive sectors for both US and European equity markets.

United States:

"The typical defensive stock in most sectors, such as Health Care and Consumer Staples, still trades at low valuations vs. the S&P 500 relative to history despite the recent outperformance of defensives," Goldman Sachs says.

Maintaining its 'overweight' recommendation, Goldman currently recommends consumer staples, software & services, and utilities.

Goldman Sachs sees a 45% probability for a U.S. recession and favours defensive sectors that typically outperform during economic downturns compared to cyclical stocks.

"We believe the balance of risks around our baseline forecasts favors defensive sectors, with recession risk elevated," Goldman added.

Within defensives, Goldman has a relative preference for staples vs healthcare, adding that staples performance has historically been more resilient in a slowing economic growth environment than healthcare.

"Consumer Staples will likely benefit relative to Health Care if the focus of policy uncertainty shifts from broad tariffs to sector tariffs, including pharmaceuticals, and fiscal policies that could affect health care spending," the brokerage added.

EUROPE:

How much recession risk are European equities pricing? - The answer is not that much, says Morgan Stanley.

However, in this macro backdrop filled with tariff uncertainty, Morgan Stanley says defense, utilities, telecoms, and software sectors offer the strongest fundamental resilience.

"Defence remains our preferred sector in Europe," says the brokerage with Rheinmetall RHMG.DE as its top pick.

Meanwhile, semiconductors, manufacturing, and automotive industries face heightened cyclical exposure and vulnerability to Trump's tariff policies, adds the brokerage.

(Akriti Shah and Rashika Singh)

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