Macquarie analysts back defensive stocks in slowing economy
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The news: Macquarie analysts expect defensive stocks to outperform the market in a slowing global economy amid prospects of central banks easing interest rates.
The context: The analysts have added stocks such as packaging giant Amcor, grains handler GrainCorp, property developer Mirvac as well as healthcare majors CSL and ResMed to their strategy portfolio.
They have reduced exposure to financials and resources stocks including Lynas Corp, Whitehaven, National Australia Bank and CBA.
The analysts updated the portfolio to position for a shift to a slowdown in the global and Australian economy, with the potential for a downturn phase to follow. They expect rate cuts from the US Federal Reserve might drive a second re-acceleration in markets, but said this usually delivers weaker returns at a time when rates have been held higher for longer, and unemployment is finally rising across economies.
What they said: "A key driver of these shifts are the expectation that bond yields fall as growth slows," the analysts said in a note.
"We increased defensives and growth. We lift REITs to overweight. We also reduce exposure to stocks that benefit from high yields and stocks that tend to offer a hedge against higher yields. Credit spreads also start to rise in a slowdown, which is another negative for banks."
The source: Macquarie research
