(Bloomberg) — The relentless drive into defensive stocks is a logical way to cope for investors beset all year by signs a recession is at hand. It’s also a tough way to set a fresh stock record.
Buoyed by a supportive Federal Reserve and strong economic data, the S&P 500 climbed within points of an all-time high Thursday only to falter as investors snubbed the growth stocks that underpinned the record bull run. They clung to industries inured to economic cycles or that go up in lockstep with bonds, making real-estate and utility stocks — among the puniest of S&P 500 groups — the sole bearers of the rebound from August’s rout. Just about everything else is in the red.
After suffering through three different 2% plunges, the sight of an inverting yield curve and Donald Trump’s trade tweets, confidence that technology and consumer shares are set to rebound remains in short supply ahead of a batch of earnings set to show shrinking corporate profits.
“People are nervous,” Peter Jankovskis, co-chief investment officer at Oakbrook Investments, said by phone. “They see signs of optimism but they’re also wary that these things have broken down several times already. They’re putting their feet back in the water with names they suspect will hold up if these hopes aren’t realized.”
Even if stocks reclaimed their July highs, new records have been something less than an all-clear signal in the U.S. stock market for almost two years. Since January 2018, the average overshoot has been 1.75% before things fell apart again. Repeating that would lift the S&P 500 to 3,088. It closed the week at 3,009, about 15 points shy of a record.