Investors are starting to play defense as the bull run matures | CNN Business (2024)

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As the economic recovery from Covid-19 has progressed this year, investors have had plenty of opportunities to place winning bets. Wagering against the bull run in stocks hasn’t been one of them.

What’s happening: The S&P 500 and the Nasdaq Composite both closed at all-time highs on Monday after shares of Apple (AAPL), Google owner Alphabet (GOOGL), Facebook (FB) and Nvidia (NVDA) all hit new records.

But even as tech stocks continue their dizzying ascent, some on Wall Street have decided it’s time to play defense.

Exchange-traded funds tracking traditionally “defensive” sectors — health care, utilities and real estate — outperformed in July and August.

The Health Care Select Sector SPDR Fund (XLV) is up 7.5% so far this quarter, while the broader S&P 500 has risen 5.4%. The iShares US Utilities ETF (IDU) has climbed 7.7%, while the iShares US Real Estate ETF (IYR) has increased 6.2%.

Companies that produce consumer staples, which also get a boost when investors turn defensive, have notched more muted gains. The Consumer Staples Select Sector SPDR Fund has risen 3% in July and August.

Bank of America’s global fund manager survey published earlier this month noted this “more defensive” tilt. Health care was the top sector among fund managers for the first time since November 2020.

What it means: As the contagious Delta variant of Covid-19 casts a haze over the economy, some investors may be getting nervous and thinking about how to protect their profits.

There are also signs that the global growth is losing some momentum.

China’s economy stalled in August, according to an official survey released Tuesday. Manufacturing activity fell to 50.1 in August from 50.4 in July. That was just above the 50-point mark indicating expansion rather than contraction, but still the slowest rate of growth since the start of the pandemic.

Service industries, which now account for a larger slice of the world’s second biggest economy, fared even worse. The non-manufacturing Purchasing Managers’ Index plunged to 47.5 from 53.3 in July, the first contraction since February 2020.

Investors aren’t just watching China. In late July, Goldman Sachs slashed its forecast for US economic activity in the second half of the year, pointing to sluggish consumer spending on services as well as the threat posed by the Delta strain. (Not to mention inflation and what the Federal Reserve does next.)

Step back: LPL Financial’s Ryan Detrick noted to clients this week that the S&P 500 hasn’t had a 5% pullback once this year. This usually happens three times a year on average. It’s no surprise, then, that at this point in the rally — with risks on the horizon — some on Wall Street are turning cautious.

Travel stocks fall as Europe drops US travelers from safe list

The European Union recommended Monday that Americans should be banned from nonessential travel to its member states after a rise in Covid-19 cases in the United States — hitting shares of airlines that have been benefiting from the gradual return of transatlantic travel.

The details: Countries within the 27-nation bloc, which includes France, Italy and Germany, have been advised to reinstate coronavirus-related restrictions and halt the arrival of tourists from the United States and five other countries.

The guidance isn’t binding, leaving the final decision up to each individual EU country. But it’s a blow to companies that had been planning for a more sustainable return to travel on the heels of vaccination campaigns.

The move could also have a negative impact on tourism-dependent economies in the bloc, including Spain and Portugal.

Investor insight: US airline stocks fell Monday. Shares of United Airlines (UAL) fell 3.8%, while American Airlines (AAL) dropped 3.5% and Delta Air Lines (DAL) shed 3.9%.

“United has worked closely with the EU and governing bodies around the world throughout the pandemic to safely reopen travel,” the airline said in a statement. “We’ll continue to monitor how member states respond to this new guidance and keep our customers informed about any changes to their travel plans.”

European airlines also took a hit Tuesday. British Airways parent IAG’s stock dipped 3.7% in early trading in London, while budget carriers EasyJet (ESYJY) and Ryanair (RYAAY) lost 2.2% and 3.1%, respectively. Air France KLM’s stock dropped 1.2% in Paris.

Is the Zoom era coming to an end?

Since the start of the pandemic, video conferencing has become an integral part of millions of lives around the world. And the name of one business has been synonymous with the boom: Zoom.

But the company’s latest earnings report, which posted after US markets closed Monday, signals that the newly-minted Zoom generation may be getting weary of all the screen time.

The scoop: Zoom Video (ZM) reported revenue of more than $1 billion for the first time in the second quarter, logging a 54% year-over-year increase. But it warned that a slowdown in demand was coming as some workers head back to the office and business travel resumes.

“We feel good that people are out moving around the world, but it’s certainly creating some headwinds, as we said, in the online segment of our business,” Kelly Steckelberg, the company’s chief financial officer, said on a call with analysts. This easing of demand is happening “a little bit more quickly than we expected,” she added.

Shares are off 12% in premarket trading on Tuesday.

Zooming out: The ubiquity of Zoom over the past 18 months has sent its stock soaring. Shares have gained more than 400% since the beginning of 2020. But despite the spread of the Delta variant, a growing desire for a (modified) return to normal will make that trajectory very hard to sustain.

Up next

NetEase (NTES) reports results before US markets open. CrowdStrike (CRWD) follows after the close.

Also today: US consumer confidence data for August posts at 10 a.m. ET.

Coming tomorrow: The latest ADP private employment report is a crucial preview of the official government jobs report due Friday.

Investors are starting to play defense as the bull run matures | CNN Business (2024)

FAQs

How do investors react to a bull market? ›

In a bull market, the ideal thing for an investor to do is to take advantage of rising prices by buying stocks early in the trend (if possible) and then selling them when they have reached their peak.

What is a bull run in investing? ›

A bull market (aka a bull run) is a long, extended period in the market when overall stock prices are on the rise. "Bull markets happen when the economy is strengthening, and stock prices are rising," says Teresa J.W. Bailey, CFP and senior wealth strategist at Waddell & Associates.

Are we in a bull market in 2024? ›

While the rally lost steam in the past two days, the market is still set for its best month in 2024. “We maintain our bullish stance here,” said Larry Tentarelli at Blue Chip Daily Trend Report.

Why is a bull market good for the investor? ›

Investor confidence will also tend to climb throughout a bull market period. The overall demand for stocks will be positive, along with the overall tone of the market. In addition, there will be a general increase in the amount of IPO activity during bull markets.

What do investors tend to do during a bull market during a bear market? ›

More people tend to invest in the market during bull periods to potentially profit. That increased demand for securities increases their price, which can then spur more even demand as even more people want in, sending stock prices—and gains—higher. Meanwhile, bear markets reflect pessimism and uncertainty.

Why are investors bullish? ›

Bullish short-term trading

For instance, if a trader believes a stock is oversold, they may buy shares in the hope of a quick reversal. Other short-term traders are bullish because they're betting some near-term event will happen in a favorable manner.

What happens after Bull Run? ›

Immediately after the Bull Run, (encierro) heifers (vaquillas) are released in the bullfight arena (Plaza de Toros). They will chase all the runners who made it into the arena. It is less dangerous to be hit by a heifer, especially because their horns are taped.

What does the Bull Run represent? ›

As is the case with most Spanish traditions, the Pamplona Spain running of the bulls started as a religious ceremony in the Middle Ages. In this case, the celebration was to commemorate the martyrdom of San Fermín, and it dates back to the 12th century.

What triggers a Bull Run? ›

There are several things that tend to accompany a bull market. For starters, they generally happen during periods when the economy is strong or strengthening. Bull markets are often accompanied by gross domestic product (GDP) growth and falling unemployment, and companies' profits will be on the rise.

Has the stock market ever hit $40,000? ›

The Dow Jones Industrial Average closed above the 40,000 mark Friday for the first time in its 139-year history. The blue-chip index initially crossed the key threshold early Thursday but ended that day lower.

What stock will boom in 2024? ›

10 Best Growth Stocks to Buy for 2024
StockImplied upside from April 25 close*
Alphabet Inc. (GOOG, GOOGL)12.2%
Meta Platforms Inc. (META)22.3%
JPMorgan Chase & Co. (JPM)11.2%
Tesla Inc. (TSLA)23.4%
6 more rows
Apr 26, 2024

How long will this bull market last? ›

The stock market's current bull rally could last for another 5 years, according to tech analyst Gene Munster. Munster said a new crop of AI companies will go public and drive a boom in the stock market. But Munster expects the stock market rally to morph into a bubble that eventually bursts.

What percentage of Americans have no money in the stock market? ›

According to a recent GOBankingRates survey, almost half of the survey's participants reported not owning any stocks, with 22% having less than $15,000 in total stock investments.

What are the 10 wealthiest US corporations trading on the stock market today? ›

Largest American companies by market capitalization
#NameC.
1Microsoft 1MSFT🇺🇸
2Apple 2AAPL🇺🇸
3NVIDIA 3NVDA🇺🇸
4Alphabet (Google) 4GOOG🇺🇸
57 more rows

Should you sell during a bull market? ›

Ideally, as investors see what appears to be the start of a bull market, they might buy stocks, stock mutual funds, and ETFs. As the bull market surges higher, they might consider selling some of their equity holdings. At the very least, they should continue with their normal rebalancing regimen.

How did investors react to the stock market crash? ›

The crash frightened investors and consumers. Men and women lost their life savings, feared for their jobs, and worried whether they could pay their bills. Fear and uncertainty reduced purchases of big ticket items, like automobiles, that people bought with credit.

Is it always smart to buy stock during a bull market? ›

Having a higher allocation of stocks is optimal in a bull market, where there's more potential for higher returns. One way to capitalize on the rising prices of a bull market is to buy stocks early on and sell them before they reach their peak.

How does the stock market affect investors? ›

The Stock Market and Consumer Spending

A rising stock market is usually aligned with a growing economy and leads to greater investor confidence. Investor confidence in stocks leads to more buying activity which can also help to push prices higher.

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