A handful of sectors have emerged as standout winners in the market turmoil of the past month: utilities, health care, real estate and financials. It hasn’t been an easy month for stocks, with President Donald Trump’s ramping trade war and economic releases ringing alarm bells of a potential recession at the forefront of investors’ minds. Indeed, the S & P 500 is down more than 5% over the past month. These stocks within the broad market index are holding up against the market tumult of the past month, and they’re up the most in that period. Most stocks — and sectors — that outperformed this month had a defensive tilt. Art Hogan, chief market strategist at B. Riley Wealth Management, pointed out that these more defensive sectors have fared well for much of the year so far. Notable groups that made CNBC’s list include utilities, health care and insurance. Within these categories, dividend payers also put on a standout performance in the period: Utility AES is up 23% over the past month and has a dividend yield of 5.4%. Insurer Allstate offers a dividend yield of 1.9%, and shares are up 11% during the period. Indeed, income from dividends can help buffer portfolios from market volatility. “It just makes sense that in this risk-off environment that investors are feeling uncertain about, that you’re going to see a tendency to seek out more defensive names and defensive sectors,” Hogan told CNBC in an interview. “And that’s been a clear pattern — not just for this month — but on a year-to-date basis,” he added. “It’s a big change from how we exited the year, and certainly a big change from the last couple of years, where everything seemed to be about technology and communication services.” Going forward, Hogan thinks it is unlikely that investors will rotate back toward riskier assets until they receive more clarity around the end game of Trump’s tariff policy. “If some of that clears, then those sectors that are the worst performing, they will be able to see a significant rebound,” he said. Hogan added that more than likely, this defensive positioning will persist until at least into the second quarter. A potential play on rates Ross Mayfield, investment strategist at Baird, thinks this defensive tilt has more to do with the interest rate backdrop. He pointed out that the utilities and real estate sectors are two that are particularly sensitive to interest rates due to their dividend yields. “The 10-year Treasury yield has come down pretty markedly year to date, so it’s provided a bit of juice to the yield-sensitive names,” he said to CNBC. When the yields on risk-free Treasurys come down, dividend stocks become more attractive to income investors. Additionally, Mayfield believes the sectors poised to grow earnings have also been given an advantage. For instance, first-quarter expectations indicated that the utilities and health-care sectors were two that were expected to have strong earnings growth. “It’s a challenging macro environment. There’s going to be a bigger dispersion between winners and losers, and that’s increasingly going to be about who’s able to grow earnings in this sort of environment,” he added. “With valuations stretched in most sectors — even the defensive ones — you kind of come back to what does the earnings backdrop for 2025 look like?” Mayfield said. “By and large health care, utilities and tech are expected to be leaders there, so that’s kind of where I would be looking toward.”
