Wall Street is loading up on boring stocks as year-end approaches, a trend that could signal investors are worried the recent market volatility could continue.
“It’s a sign investors are getting more defensive, but it would have made more sense to get into these names in the summer when they were beaten down,” said Andrew Slimmon, managing director at Morgan Stanley investment Management.
The broader market cut some of its steep losses this week, with the S&P 500 rallying 4 percent in its best weekly performance since 2011. But the fact that investors are still adding onto their defensive positions hints that Wall Street still fears stocks could retest the lows seen in the correction.
To be sure, stocks are entering a time of the year that is typically strong for them. According to data from The “Stock Trader’s Almanac,” the S&P 500 averages a gain of 1.6 percent in December. LPL Financial’s Detrick also points out that December has never been the worst month of the year for the S&P 500.
“It’s the feel-good time of the year,” Detrick said. “There isn’t that much big news in December and there isn’t a lot of trading. We wouldn’t be surprised if we see a rally into year-end.”