We are presently seeing the market lose its risk appetite, volatility is increasing, and defensive plays are outperforming. Despite still seeing some growth in economies (albeit modest), strategists and economists remain cautious and have begun to revise down their GDP growth estimates. 
Chart 1 highlights that market sentiment shows we are presently in an ‘early bear’ phase where defensive stocks within the Health Care and Consumer Non-Discretionary sectors tend to outperform. If we look at chart 2, we can see this has been the case over the past six months (pink bars). Defensive sectors have outperformed, while the sectors that traditionally outperform in the preceeding early bull phase, Financials and Technology, have all greatly underperformed. To cement the ‘smart money’ shift, we also analysed the six- month performance from 31 March 31 (red bars in chart 2) which shows that sectors, from the ‘middle’ and ‘late bull’ phase, like Energy, Capital Goods, Materials all greatly outperformed.
If the market is correct and we are in the ‘Early Bear’ section of the stock market cycle the best investment would be to gradually move away from Healthcare and Consumer Non-Discretionary stocks into the utilities’ sector. Whilst it may not be the most interesting sector it might be the only really profitable sector in the next couple of quarters.
In chart 3 we highlighted a number of utilities (gas distributors and electric utilities) that might present attractive upside, given valuations and significant target to price spread alongside their respective dividend yields.
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