Defensive-oriented stocks in Europe have bounced back since Federal Reserve chairman Ben Bernanke has announced the decision to continue its historic bond buying program, according to Russell Indexes.
After gravitating toward more dynamic-oriented stocks and moving away from defensive-oriented stocks when Bernanke first discussed tapering on May 22, in the past week investors appear to have moved back into defensive-oriented European stocks and sectors, as illustrated by the Russell Indexes.
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After underperforming the Russell Developed Europe Dynamic Index by more than 6% between May 22 and September 17, the Russell Developed Europe Defensive Index outperformed its Dynamic counterpart by 0.3% between September 18 and September 24.
The Russell Developed Europe Index Healthcare sector, after losing (-3.3%) between May 22 and September 17, has gained 0.7% between September 18 and September 24. The Russell Developed Europe Index Consumer Staples sector, after losing (-3.4%) between May 22 and September 17, has gained 0.3% between September 18 and September 24.
Stephen Wood, chief market strategist at Russell Investments, said: "The FOMC ‘no taper’ decision surprised the market and suggests that the Fed’s assessment is that US economic and inflation data are softer than they had previously let on.
"Given the yield implications of the Fed’s non-move, and the expectation of another acrimonious debt-ceiling negotiation in Washington, index data suggest that European investors appear to have taken a more defensive stance, gravitating toward higher quality defensive stocks and defensive sectors," Wood added.
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By GlobalData
