Defensive stampede risks turning “safe” stocks into the next bubble

A record rush into defensive stocks risks turning “safe” stocks into the next bubble, warns the CEO of deVere Group, one of the world’s largest independent financial advisory organisations.

The comments from Nigel Green come as global consumer staples stocks post their best month since 1998, soaring 10.6% in October, while global healthcare jumps 9.8%, its second biggest monthly gain this century.

Over the same stretch, global tech shares have tumbled around 13% from their early October peak.

He says: “Investors have bolted from tech and squeezed into the same small group of so-called safe stocks.

“When everyone shelters under one roof, it gets crowded and expensive very quickly. Supermarkets and household goods makers are now priced as though they’re growth stories, and they’re nothing of the sort.

“We believe this corner of the market is now far more exposed than most people think.

“The next shock could well come from the place investors consider bulletproof.”

Consumer staples now trade on around 23.8 times forward earnings, their richest level since 1998 and up from below 21 times a year ago.

Large US tech stocks, by contrast, trade on roughly 23 times expected 2026 profits, with the wider market near 21. Some of the biggest supermarket names sit above 40 times forward earnings, while the leading AI chipmaker trades nearer 13.

Nigel Green continues: “Look at what investors are actually buying. Staples earnings have grown by under 5% a year over the past decade, and dividend yields are among the skimpiest they’ve been since 2005.

“You’re paying a premium for slow growth and getting less income while you wait.

“When safety costs more than growth, the safety trade has stopped doing its job.”

The deVere CEO points to the speed of the shift as a warning sign. On 9 November, Wall Street’s benchmark index posted its biggest one-day gain since April, rising 2.35%. Technology stocks climbed 3.73% while staples managed just 0.90%.

He adds: “Money that floods in at speed can leave at speed. The moment sentiment on tech steadies, this trade could unwind sharply, and late arrivals tend to pay the most.

“We caught a glimpse of it this week, when buyers piled back into tech and the defensive names barely moved.”

Meanwhile, the AI spending boom shows little sign of slowing. The largest technology groups are forecast to spend between $803 billion and $828 billion on capital expenditure in 2026, with third quarter outlays alone up about 20% on the previous quarter.

The deVere CEO notes: “Markets have priced an enormous amount of fear into tech in a matter of weeks. These companies are still pouring record sums into AI and signalling more for 2027.

“Some of that spending will disappoint and some will pay off handsomely. We believe the coming months are likely to sort one from the other, and markets will reprice both camps aggressively when they do.”

Europe offers a reminder of what a different market make up can deliver. The region’s main share index is up about 1.5% in November, while the tech-heavy US benchmark is down more than 2%.

“Diversification is a word investors nod along to and then quietly ignore,” says Nigel Green.

“Genuine diversification means spreading exposure across regions, sectors and asset classes, and even currencies, so no single theme, whether it’s AI or the scramble for safety, dictates the outcome.

“Europe’s run this month shows exactly why it matters.”

He concludes: “Every cycle throws up a trade that feels too obvious to lose money on. A few years ago it was anything with a tech label.

“Right now, it’s looking like the dependable household names everyone suddenly wants to own.

“We believe the next shock could now come from the stocks investors are most convinced are safe.”