Defensive sectors beneficial for equity portfolio

Oksana Patron

4 November 2022

Investors should remain patient amid market gyrations while tilts toward defensive sectors and a quality bias will be beneficial for equity portfolio positioning over the intermediate term, according to ClearBridge.

Although the durable recovery is expected to unfold eventually, the market turbulence was believed to continue through the coming quarters as investors would face their first proper economic downturn in over a decade, ClearBridge investment strategist, Jeff Schulze, and vice president, investment strategy analyst, Josh Jammer, said in their latest market update.

“While the current selloff is now 10 months old, it remains much shorter than the 16-month average that post-WWII bear markets have lasted. The bottoming process is a bumpy road that typically sees both ups and downs, requiring investor patience,” they said.

“Countertrend rallies are not uncommon during extended bear markets. We believe a durable bottom has not yet formed and equity investors would be well-served to remain patient as this process plays out.

“Given the historical bump for stocks following midterm elections, the current rally has a solid chance of running further as clarity over control of Congress and the policy agenda emerges.

“Nevertheless, the economic outlook continues to deteriorate as evidenced by two negative signal changes in the ClearBridge Recession Risk Dashboard this month: Job Sentiment and the Yield Curve.”