Rudi's View | Jun 12 2025
By Rudi Filapek-Vandyck, Editor
Defensive stocks look fully valued, argue equity market strategists at Bell Potter, but as is so often the case, there are always laggards that might now represent better value.
Oh. Did I give away the conclusion from Bell Potter's latest strategy update already?
I'll keep it short then. Bell Potter suggests Telstra ((TLS)), Transurban ((TCL)) and the supermarket operators have already enjoyed most of the re-rating that should be expected, with Coles Group ((COL)) preferred over Woolworths Group ((WOW)).
The suggestion is investors looking for defensive exposure in their portfolio should now be considering Amcor ((AMC)) instead, or APA Group ((APA)), or Treasury Wine Estates ((TWE)). The latter is seen as representing "an attractive opportunity" despite recent earnings downgrades.
Generally speaking, the strategists are of the view we have now moved past the peak in tariffs uncertainty, and the outlook should only improve from here onwards, making "expensive defensives" a less attractive option.
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Equally noteworthy: Citi's US strategists recently raised their year-end S&P500 target to 6,300. Their colleagues in Europe have set a year-end Stoxx 600 target of 570, implying similar, low-single-digit upside.
Within the European market, the preference is for beaten up Cyclicality. Catalysts in favour of continued rerating include: visibility on US trade policy, delayed implementation of Section 899, ongoing ECB rate cuts, and macro data improvements.
Citi's portfolio suggestions in Europe are Overweight in Tech, Travel and Leisure, Autos and Real Estate, as well as in traditional Defensives (Health Care, Personal Care). Most preferred countries are the UK, France and Germany.
Over in the USA, the preference is with IT, Health Care, Communication Services, and Financials. Energy has been downgraded to a Neutral exposure, while Consumer Discretionary, Industrials, Consumer Staples, and Materials all remain inside the Underweight basket.
Also, Citi's so-called Bear Market Checklist suggests there's currently no bear market in sight, nowhere.
Offsetting Citi's liking for cyclicals, UBS is not. UBS sees weakening economic momentum ahead and the next rate cut by the Federal Reserve not due until the September meeting.
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