“Traders are really getting spooked,” says Channing Smith of Capital Advisors. The European debt crisis has worsened, while soft data from around the world has hurt sentiment. The Philadelphia Federal Reserve’s manufacturing survey, for instance, “has collapsed”, says James Mackintosh in the FT. It looks as though the American economy “is heading for a repeat of last summer’s slowdown”.
Japan has fallen back into recession and a survey of China’s manufacturers points to the slowest growth in ten months. The eurozone PMI, an index of both manufacturing and services activity, is down to a seven-month low, due largely to French and German data.
Given growing uncertainty, the defensive stocks that MoneyWeek has been recommending for some time look set to become increasingly popular. Despite a recent rally, defensives have lagged the overall market by 23% since the start of 2009 and remain good value, says Morgan Stanley’s Graham Secker.