These Defensives Could Rebound Despite Recession-Driven Bear Market: Analyst

Most sectors are stumbling, but the more defensive corners of the S&P 500 are quietly setting up for a comeback.

That’s according to JPMorgan's Jason Hunter, who breaks the market into three camps:

Former leaders (Tech, Consumer Discretionary, Financials)
Cyclical sectors (Industrials, Materials, Energy), and
Defensives (Healthcare, Staples, Utilities).

The first two groups have cracked below key levels. Hunter predicts that even after recent bounces, they're likely to fade again before any real recovery takes hold.

Reflex Bounces Or Just False Hope?

Tech and Discretionary stocks saw sharp rebounds. But don't get too excited. In his latest technical chartbook, Hunter expects resistance near prior breakdown levels to stop these rallies in their tracks.

Tech, as tracked by the S&P 500 Information Technology Sector Index (S5INFT Index), shows a ceiling between 3905 and 4240.

Discretionary? The S&P 500 Consumer Discretionary Sector Index (S5COND Index) will likely fizzle between 1525 and 1660 before heading back toward support.

Financials aren't faring any better. The S&P 500 Financials Sector Index (S5FINL Index) broke down from a classic top formation, and although it bounced, Hunter sees resistance near 767-791 acting as a lid before another leg down.

Cyclicals Look Exhausted

Industrials, Materials, and Energy all saw sharp pullbacks, many of which hit key support zones. Industrials, as tracked by the S&P 500 Industrial Sector Index (S5INDU Index), are bouncing from the 960-990 zone but face resistance just above 1050.

Materials may be priced in a global manufacturing slump, with further downsides possibly occurring if economic data worsens. And Energy remains stuck between breakdown levels and deeper long-term support near 500-533 for the S&P 500 Energy Sector Index (S5ENRS Index).

The takeaway? These economically sensitive sectors look bruised, and any bounce could be short-lived.

Defensives: The Quiet Comeback Kids

Where's the relative strength? It's in the so-called boring stuff.

Defensive sectors don't show the same distribution—or investor exit—patterns that plague other groups, says Hunter. That gives them a cleaner technical setup.

Healthcare is bouncing after narrowly missing its key support zone and may climb back into the upper end of its recent range.

Consumer Staples, as tracked by the S&P 500 Consumer Staples Sector Index (S5CONS Index), are holding their trading band, and if they can clear resistance around 870, it could mark a shift in trend.

Utilities, meanwhile, as represented by the S&P 500 Utilities Sector Index (S5UTIL Index), are attempting to bounce from the 360-370 zone. A push past 391 could open the door to more upside.

For investors looking to lean into the defensive rebound, sector ETFs offer a straightforward way to gain exposure. The Health Care Select Sector SPDR Fund XLV tracks major healthcare names and shows signs of stabilization. The Consumer Staples Select Sector SPDR Fund XLP captures companies with steady demand, from food producers to household goods giants, and could benefit from renewed risk-off sentiment.

Meanwhile, the Utilities Select Sector SPDR Fund XLU offers exposure to power and water utilities that typically hold up well during economic slowdowns. These ETFs trading near key support zones may offer a lower-risk entry point as markets search for firmer footing.

S&P 500 Still Has Work To Do

The overall market, as represented by the S&P 500 Index, is bouncing from its 4500-4800 long-term support zone, but Hunter warns that the rally could stall near 5396 or 5450. From there, another retest of support looks likely before a more durable bottom can take shape.

The market remains in a recession-driven bear, with more downside risk across most sectors. But while the high-flyers and cyclical names may struggle, the defensives are quietly preparing to step into the spotlight. Sometimes, playing it safe is the boldest move of all.

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