Why You Shouldn’t Panic: Expert Advice from New York Life’s Goodwin on Staying Steady with Stocks
Warnings from Ally Financial about potential credit challenges hint that the U.S. economy may be nearing a recession. However, it might not be the time to flock to traditional defensive stocks, according to Lauren Goodwin, economist and chief market strategist at New York Life Investments. Speaking to CNBC, Goodwin emphasized the importance of “quality equity” across various sectors over purely defensive plays.
Goodwin explained that although sectors will fluctuate as a recession nears, equities as a whole might not be a consistent investment strategy unless jobless claims increase significantly, or earnings growth declines. Defensive stocks, such as utilities and hospitals, traditionally perform well during downturns due to their stable sales. However, “quality” stocks, identified by a company’s financial strength, can exist in any industry.
Moreover, Goodwin noted that the current election cycle could spur sector volatility as investors try to predict how various outcomes may influence future policies. Investors should also consider that some defensive sectors have already shown strong performance. For example, the Utilities Select Sector SPDR Fund (XLU) rose 13% in Q3, potentially driven by expected energy demands from AI developments. Similarly, the Consumer Staples Select Sector SPDR Fund (XLP) and Health Care Select Sector SPDR Fund (XLV) increased by 9% and over 6%, respectively, in the same period.
Instead of moving to defensive stocks, Goodwin advises investors to explore opportunities to secure higher yields in fixed income investments before the Federal Reserve potentially lowers rates. This shift could better position portfolios amid economic uncertainties and evolving market conditions.
In sum, the focus should be on identifying quality investments across sectors and locking in favorable fixed income rates, rather than solely relying on traditional defensive stocks in an uncertain economic landscape.
Original Story https://www.cnbc.com/2024/09/10/its-not-time-to-shift-in-defensive-stocks-just-yet-new-york-lifes-goodwin-says.html
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