"Defensive stocks are defined as the stocks in companies that are grouped in sectors supplying goods and services in constant demand as essentials, and thus, do not follow trends of popularity. While the Magnificent 7 tech-stock-led S&P 500 sailed into the home stretch close of 2025 up +17%, an underlying trend that had started a few months earlier was identified by Goldman Sachs, Morgan Stanley, and others that raised more than a few eyebrows: investors were selling tech stocks to buy defensive stocks ."
"The myriad of reasons for this rotational shift in asset allocation from hedge funds and other large institutional investors reflected a range of sentiments and concerns over valuations, supply chains, and a host of other areas. Given that the trend has yet to abate, 2026 might be a significant one for defensive stocks to at least regain their traditional weighting of global investment funds away from the overbuying of riskier, high-flying tech stocks."
"The rotation trend began picking up speed in November, 2025. Bank of America reported that hedge funds, other institutions and large retail investors were unloading tech stocks, with some stock sales surpassing $5 billion in one week. In Goldman Sachs' analysis, hedge funds were selling tech stocks and specifically shifting funds into healthcare, in addition to a selloff of consumer discretionary (i.e. hotels and restaurants) into consumer staples."
Defensive sectors include healthcare, consumer staples, utilities, and energy, supplying essentials with steady demand. Institutional and hedge fund investors began rotating capital away from top technology names into defensive sectors beginning in late 2025. Selling and short interest in technology increased, with some weekly tech stock sales exceeding $5 billion. Analysts from major banks noted reallocations into healthcare and consumer staples as consumer discretionary was sold. The rotation aims to reduce exposure to richly valued, high-growth tech positions and to restore traditional defensive weightings within global investment funds heading into 2026.
Read at 24/7 Wall St.
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