Global Defensive Sector Funds Experience Surge in Inflows Amid Economic Slowdown Concerns
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Global defensive sector funds see surge in inflows on slowdown fears
(Reuters) - Global defensive sector funds are in demand from investors as concerns about a slowdown in the U.S. economy forces them to seek assets such as consumer staples and utilities stocks that can withstand weakness in labour markets and commodities. BY THE NUMBERS According to LSEG Lipper data, defensive sector funds such as consumer staples and utilities attracted substantial inflows of $1.43 billion and $1.06 billion, respectively, over the last two weeks. In contrast, sectors such as technology, financials, and industrials experienced significant outflows, totalling $2.97 billion, $1.38 billion, and $540 million respectively. Over the past month, the MSCI Consumer Staples index has seen a notable increase of 3.92%, significantly outpacing the 1.35% gain of the MSCI World index. WHY IT'S IMPORTANT This shift in trend could diversify the market rally, as defensive sectors such as consumer staples and healthcare were previously sidelined in favour of growth-oriented sectors such as tech and artificial intelligence. CONTEXT U.S. manufacturing PMIs showed factory activity continued to contract in August, while employment reports suggested the labour market cooled. Some analysts believe that mere rate cuts may not adequately offset the decline in corporate profits or market uncertainties, if the economy is moving towards a recession. KEY QUOTE Since the start of September, defensive sectors have emerged as market leaders in response to increasing signs of an economic slowdown, said Rob Anderson, U.S. sector strategist at Ned Davis Rsearch. However, he said: "If stocks rally post-election as uncertainty lifts and seasonality turns more favourable, cyclical sectors could once again gain the upper hand." (Reporting By Patturaja Murugaboopathy and Gaurav Dogra in Bengaluru; Editing by Vidya Ranganathan and Alex Richardson)
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Global defensive sector funds see surge in inflows on slowdown fears
Sept 17 (Reuters) - Global defensive sector funds are in demand from investors as concerns about a slowdown in the U.S. economy forces them to seek assets such as consumer staples and utilities stocks that can withstand weakness in labour markets and commodities. BY THE NUMBERS According to LSEG Lipper data, defensive sector funds such as consumer staples and utilities attracted substantial inflows of $1.43 billion and $1.06 billion, respectively, over the last two weeks. In contrast, sectors such as technology, financials, and industrials experienced significant outflows, totalling $2.97 billion, $1.38 billion, and $540 million respectively. Advertisement · Scroll to continue Over the past month, the MSCI Consumer Staples index (.dMIWD0CS00PUS), opens new tab has seen a notable increase of 3.92%, significantly outpacing the 1.35% gain of the MSCI World index (.MIWD00000PUS), opens new tab. WHY IT'S IMPORTANT This shift in trend could diversify the market rally, as defensive sectors such as consumer staples and healthcare were previously sidelined in favour of growth-oriented sectors such as tech and artificial intelligence. Advertisement · Scroll to continue CONTEXT U.S. manufacturing PMIs showed factory activity continued to contract in August, while employment reports suggested the labour market cooled. Some analysts believe that mere rate cuts may not adequately offset the decline in corporate profits or market uncertainties, if the economy is moving towards a recession. KEY QUOTE Since the start of September, defensive sectors have emerged as market leaders in response to increasing signs of an economic slowdown, said Rob Anderson, U.S. sector strategist at Ned Davis Rsearch. However, he said: "If stocks rally post-election as uncertainty lifts and seasonality turns more favourable, cyclical sectors could once again gain the upper hand." Reporting By Patturaja Murugaboopathy and Gaurav Dogra in Bengaluru; Editing by Vidya Ranganathan and Alex Richardson Our Standards: The Thomson Reuters Trust Principles., opens new tab
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Global defensive sector funds see surge in inflows on slowdown fears
Paid parking in Dubai: Residents face up to Dh4,000 extra yearly costs when new rates kick in Global defensive sector funds are in demand from investors as concerns about a slowdown in the US economy forces them to seek assets such as consumer staples and utilities stocks that can withstand weakness in labour markets and commodities. According to LSEG Lipper data, defensive sector funds such as consumer staples and utilities attracted substantial inflows of $1.43 billion and $1.06 billion, respectively, over the last two weeks. In contrast, sectors such as technology, financials, and industrials experienced significant outflows, totalling $2.97 billion, $1.38 billion, and $540 million respectively. Over the past month, the MSCI Consumer Staples index has seen a notable increase of 3.92%, significantly outpacing the 1.35% gain of the MSCI World index . Why it's important This shift in trend could diversify the market rally, as defensive sectors such as consumer staples and healthcare were previously sidelined in favour of growth-oriented sectors such as tech and artificial intelligence. However, he said: "If stocks rally post-election as uncertainty lifts and seasonality turns more favourable, cyclical sectors could once again gain the upper hand."
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Investors are flocking to defensive sector funds as fears of an economic slowdown grow. Healthcare, consumer staples, and utilities sectors are seeing increased interest, while cyclical sectors face outflows.
Defensive Sectors Gain Traction
As concerns about a potential economic slowdown intensify, global investors are increasingly turning to defensive sector funds for protection. Data from LSEG Lipper reveals a significant surge in inflows to these traditionally stable sectors, highlighting a shift in market sentiment and investment strategies
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.Healthcare Leads the Pack
Among the defensive sectors, healthcare has emerged as the frontrunner, attracting substantial investor interest. In the week ending September 13, healthcare sector funds saw an impressive inflow of $1.03 billion, marking their largest weekly inflow since mid-July
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. This trend underscores the sector's perceived stability and potential for growth, even in challenging economic conditions.Consumer Staples and Utilities Follow Suit
Following closely behind healthcare, consumer staples and utilities sectors have also experienced notable inflows. Consumer staples funds received $442 million, while utilities sector funds attracted $80 million in the same period
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. These sectors, known for their steady demand and relatively stable earnings, are increasingly viewed as safe havens by investors seeking to mitigate risk.Cyclical Sectors Face Outflows
In contrast to the defensive sectors' gains, cyclical sectors have witnessed significant outflows. Financials and industrials, in particular, have been hit hard, with outflows of $2.37 billion and $1.48 billion, respectively
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. This shift away from cyclical sectors reflects growing investor caution about the economic outlook and a preference for more resilient investment options.Market Indicators and Economic Concerns
The surge in defensive sector inflows comes amid a backdrop of mixed economic signals. While some indicators suggest resilience in the U.S. economy, others point to potential headwinds. The Federal Reserve's hawkish stance on interest rates and concerns about inflation have contributed to investor unease
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. These factors, combined with global economic uncertainties, are driving the shift towards defensive positioning in investment portfolios.Related Stories
Implications for Market Dynamics
The increasing allocation to defensive sectors could have broader implications for market dynamics. As funds flow into these sectors, valuations may rise, potentially impacting future returns. Conversely, the outflows from cyclical sectors might create opportunities for value investors willing to take on more risk
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. This rotation between sectors highlights the importance of diversification and active management in navigating uncertain economic times.Global Perspective
While the trend is particularly pronounced in the U.S. market, it reflects a global sentiment. Investors worldwide are reassessing their portfolios in light of economic uncertainties, geopolitical tensions, and the potential for a broader economic slowdown
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. The defensive sector surge is thus not just a localized phenomenon but a reflection of global investor sentiment and risk assessment.References
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