To The Moon

The stock market has been volatile lately, with large single-day rally/plunge. Investors can't tell the stock trend easily. However, inflation and recession expectations are undoubtedly the biggest factors affecting the stock market in 2022. With such expectations, defensive sector become a safer choice.

1. Analysts take on why choose defensive sector

1) UBS believes that

rather than disengaging from the market, investors are more advised to increase hedging and more defensive investments in the market.

2) Morgan Stanley's chief US equity strategist and chief investment officer, believes

the bottom line for investing is to stick with defensive sectors and stocks as ordinary companies face challenging earnings conditions.

3) Citi analysis, in the current environment,

utilities, consumer staples, real estate, communications services and health care and other traditional defensive stocks earnings "less sensitive to economic activity," and therefore more attractive to investors worried about the recession.

2. Which companies to choose in the defensive sector?

YTD performance of defensive companies vs. SPX.; data from tradingview

1) Food

Food prices have risen continuously this year, but consumers will not reduce food spending due to higher prices.

This means that on the one hand, food companies can enjoy the benefits of higher food prices, but also pass on the cost increases to consumers. This reason also explains last week's $Pepsi(PEP)$ raised Q3 earnings estimates, pulling up the performance of the sector.

One leading food company, $Hormel(HRL)$ , has been less affected by the economic cycle in the past year.

Over 40 of Hormel brands are No. 1 or No. 2 in their categories. These products are sold in more than 80 countries, including China, Japan, Australia, South These products are sold in more than 80 countries, including China, Japan, Australia, South Korea and the Philippines.

Photo from Hormel

In addition, investors can also look at the Consumer Staples Select Sector ETF-$Consumer Staples Select Sector SPDR Fund(XLP)$ , which covers food and beverage, household and personal products, tobacco and retailers, among others.

2) Medical

Medical is another type of essential product and also one of the sectors that has performed well during the market downturn.

$Eli Lilly and(LLY)$ and Company discovers, develops, and markets human pharmaceuticals worldwide. Eli Lilly 's YTD performance was 22.46%, way higher than the broader market.

Photo from google

In addition to companies, investors may also want to consider buying the Healthcare ETF-$Health Care Select Sector SPDR Fund(XLV)$ , which tracks biopharmaceuticals, life sciences, and companies that provide healthcare equipment and supplies.

3) Utilities

The utilities sector includes electric, natural gas and water companies, as well as independent power producers and energy traders.

$Southern(SO)$ company, through its subsidiaries, engages in the generation, transmission, and distribution of electricity. It has been named the No. 2 Best Large Employer in America in Forbes magazine's 2022 rankings.

Photo from google

As with other sectors, investors can purchase the underlying sector ETF-$Utilities Select Sector SPDR Fund(XLU)$ , but investors should be aware that this ETF tracks many energy companies.

Do you think it's a good choice to buy defensive sectors?

Can you recommend other defensive companies?

Share your thoughts in the comment section~