Market nosedive spurs run to unsexy

TNEW YORK HE stock market’s plunge over the past three weeks has investors showing love to companies they had been ignoring.

Steady, plodding, unsexy stocks such as utilities, household goods makers and real estate investment trusts have done far better than the rest of the market during the recent stumble. And Wall Street is now shunning the stocks that have been leading the market over the past decade, such as technology and consumer-focused companies.

Stocks started skidding when a combination of strong economic data and comments from the Federal Reserve led to a big jump in interest rates. Investors began to worry that interest rates would go higher than they expected and that those increased rates would slow down economic growth. That has been damaging to high-flying stocks like Amazon and Netflix because investors who buy them are expecting many years of strong profits that can be eroded by climbing rates.

“Those sectors are particularly vulnerable because they’re (valued) based on cash flows longer into the future,” says Kate Warne, an investment strategist for Edward Jones.

Also, the U.S.-China trade dispute drags on.

Tech and retail companies have done far better than the rest of the stock market since the Great Recession of 2008-09, but the past few weeks have been quite a turnaround: companies like Amazon, Caterpillar and Nvidia are bringing up the rear in the S&P 500 while companies like Walgreens, Conagra and PPL are leading the way.

Investors favor those stocks when markets get rough. The amount of cash they pay out in dividends makes them relatively stable. Those groups of stocks don’t depend much on economic growth: Whether the economy is booming or slowing, people will probably spend about the same amount on breakfast cereal or toilet paper.

Warne says the market’s recent weakness won’t last because the economy is still doing well. But she said the days of defensive stocks lagging far behind the rest of the market are probably over.