Consumer Staples

Favor Health Care and Utilities for defensive positioning amid economic slowdown and volatility as the presidential election approaches. A Republican Sweep favors Real Estate and Materials, while the second most likely outcome, Democrat gridlock, favors Health Care, and Information Technology.

Concerns about the global economy have shifted from sticky inflation to faltering growth. Tight monetary policy is finally starting to bite. We suggest increasing portfolio defensiveness.

Generative AI-related rally resumed in May. Much of the recent market gains are down to excess liquidity that was begotten by the massive pandemic stimulus, creating a dichotomy between multiple economic challenges and exuberant markets. The Fed is unlikely to step in to prevent the bubble as it is currently more worried about the near-term downside for growth than financial stability.