While it has been a great month for investors it has been even better for those who played it safe.
The biggest winning sectors so far this month were telecoms and consumer staples. These two traditionally defensive groups have significantly outperformed the overall market. The SPDR Consumer Staple (NYSE: XLP) is up a 6.4% so far this month. The iShares Telecommunication (NYSE: IYZ) is up 5.2%.
But that performance is going to fall back to earth in November.
The reasons for the outperformance were fairly obvious at the beginning of October, traditionally a tough month for investors. Some of the largest market declines happen in the month.
In addition, investors were faced with the debt ceiling debate that at the start of the month was far from being resolved. No wonder market participants gravitated to defensive issues like consumer staples and telecom.
Stocks to sell before a year-end rally
Now with those issues behind us look for a more aggressive posture to be taken in November. You’re going to want to sell those defensive stocks and look for beta – stocks that are more volatile than the rest of the market – for the remainder of the year.
A year-end rally is likely with little in the way of headwinds.
There will be no taper talk until at least next year. As such, bond yields will drift lower further enticing the risk on trade.
Here then are three defensive stocks to jettison from your portfolio now: