Often times investors and investment professionals use so-called “Defensive Sectors” to help reduce downside risk to an overall portfolio. This idea helped for a good while back in 2008… yet once these Defensive ETF’s started breaking support, that was when the broad market picked up downside momentum.
Any reason to pay attention to these “Defensive” sectors right now? Yes!
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Attached is a 3-pack, reflecting three so-called “Defensive etf’s…Consumer staples, Healthcare and Utilities. As of the past couple of days, the Utilities ETF/XLU has broken key support, with Staples and Health care pushing support to an extreme!
If investors/professionals are using these ETF’s, a big caution sign will go up if support is taken out, not only toward these three….the broad market as well!!!
Remember, once the defensive plays started to breakdown in 2008, big time weakness took place across the board.
Len….Awesome point and very possible! One Billion Dollar question, in my opinion it this….If money moves out of the defensive sector, will it move to growth/risk or capital protection. It is this issue/line of thinking, that I hoping people will consider/think about.
Is it wise to use 2008 as a reference? In my opinion, yes it is. Most think 2008 was a bad time frame due to the declines in the market. I have been referencing 2008, due to the continued high risk…which is “correlation risk!” What was wrong with 2008? Nothing unless you owned it. I stink at messaging…just attempting to share that in my 31 years, I am of the opinion risk is off the scale, due to how many assets and markets around the world have close to .90 correlation ratio.
2008 didn’t provide many places to hide, other than cash and the Dollar and I remained concerned that current times are not providing many “Capital preservation” places to avoid declines.
Thanks for your great comments and question Len,
Chris
Is it possible their is a rotation going on from so called defensive sectors to risk assets? Seemed to rotate today.
Is it wise to use 2008 as a reference? Seems we were in a pretty special time period back then that does not seem equal.