Investors head into a busy week for economic data watching if leadership in the US stock market could be moving away from defensive equity areas that indicates greater appetite for risk.
While the benchmark S&P 500 index is down 3.7% in 2025, with stocks jolted by concerns about economic damage from President Donald Trump's tariffs, the consumer staples and utilities' sectors, typically seen as more safe-haven areas of the market, are up this year 5% and 5.6%, respectively.
Investors often seek shelter in those groups because their businesses are considered relatively immune to economic slowdowns while the stocks tend to offer strong dividends.
"If the market is in a risk-off mode, those sectors will continue to lead," said Chuck Carlson, CEO at Horizon Investment Services.
More recently, however, as the US market has rebounded from its lows over the past month, groups like technology, industrials and consumer discretionary that are more associated with upbeat economic sentiment, or "risk on" investor behaviour, have been outperforming.
Leadership moving from defensive sectors to those areas or groups tied to the economy such as financials or energy could be "a sign perhaps that investors are regaining some animal spirits with regard to the prospects for the economy," said Mark Luschini, Chief Investment Strategist at Janney Montgomery Scott. "That would be a tell of less caution being insinuated by investors," Luschini said. While data so far this year has indicated resilience in the economy, sentiment surveys and other "soft data" have been weak.
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