Defensive Growth Emerges as Macro Clouds Gather

Market backdrop – record highs but broadening cracks

Wall Street entered September near record levels, yet the mood is cautious. Major indices closed at or near all-time highs at the end of August, but valuations look fully priced, and strategists warn that markets “aren’t pricing in a lot of risks”. A weaker U.S. labour report on August 30 added to concerns: only 22,000 jobs were created versus expectations for 75,000, and the unemployment rate rose to 4.3%, the highest since 2021. Softness in employment data prompted investors to anticipate a more aggressive cycle of U.S. rate cuts – futures markets now price in a meaningful probability of a 50 basis-point cut at the Federal Reserve’s September meeting. That prospect lifted rate-sensitive sectors such as real estate but weighed on bank stocks. At the same time, the bond market has responded to the economic slowdown; the 10-year Treasury yield has fallen toward 4%, while the U.S. dollar has retreated to six-week lows.

These macro dynamics—high equity valuations, slowing growth, and imminent rate cuts—set the stage for a rotation toward defensive, yield-supported sectors. Morningstar’s September outlook notes that small-cap and value stocks outperformed in August, yet many remain undervalued; it sees room for outperformance in energy, communications, real estate, and healthcare sectors, especially if the economy re-accelerates following rate cuts. The current Stock Trends Weekly Reporter data reveal that investors are indeed favouring sectors tied to hard assets and essential services.

Sector breadth – Materials and Utilities top the leaderboard

The Materials and Utilities sectors lead the Stock Trends momentum tables this week. Roughly two-thirds of materials stocks and utilities stocks are in Bullish trend categories (64% and 63%, respectively), far above the market-wide average. Materials companies also post the highest Stock Trends Inference Model (ST-IM) long-term momentum (40-week horizon) score in the universe and strong short-term momentum (4-week horizon). Investors appear to be positioning for persistent inflation risks by favouring gold, copper, uranium, and other scarce resources, while also embracing regulated utilities as bond-like income streams as rates head lower.

Top trending materials names include:

• Faraday Copper (FDY-T) – The junior copper producer has surged on speculation that its resource base will benefit from energy-transition demand. It leads the materials universe with strong ST-IM  return estimates: 4-week  return of 7.3% and 13-week return of 15.9 %.
• Augusta Gold (TRX-A), American West Metals (AUST-A) and Western Rare Earths (WRN-A) – these explorers show 4-week returns estimates above 3.5% and long-term estimates exceeding 30%.
• American Manganese (WWR-A) and Universal Alloy (UAMY-A) – highlight the market’s interest in critical minerals tied to battery technologies.

In Utilities, traditional electricity providers and renewable generators alike show steady Bullish trends. Duke Energy (DUK-N), Korea Electric Power (KEP-N) and American Electric Power (AEP-Q) have 4-week returns estimates of 2% and 13-week estimates between 3% and 5% (ST-IM). The utility sector’s yield and defensive attributes make it attractive as investors brace for slower economic growth. Emerging market utilities such as Empresa Eléctrica de Guayaquil (ELP-N) and independent power producer PNM Resources (PNW-N) are also trending higher.

Stock Trends report tip: The Bulls vs Bears report is Stock Trends’ gauge of investor sentiment across exchanges. During periods of rotation, this report can reveal whether the distribution of bullish and bearish trends is widening in your target exchange. 

Energy & Industrials – momentum in the transition

The Energy sector has more than 55% of its names in Bullish trends. Rising uranium and renewable-energy stocks dominate the leader board:

• Uranium Energy (URG-A) and Energy Fuels (UUUU-A) are highlighted with strong short and medium-term momentum expectations, reflecting renewed interest in nuclear power as a carbon-free baseload.
• Oil States International (OIS-N) and SunRun (RUN-Q) show sustained momentum, highlighting investor appetite for both conventional and alternative energy plays.
• Energy Fuels Resources (EFR-T) remains in a strong Bullish trend after the summer months of outperformance.

Industrials also show breadth, with 53% of names in Bullish trends. Notable leaders include Safe Pro Group (SPAI-Q) and shipping firm PSHG (PSHG-Q), both boasting bullish ST-IM estimates. Ballard Power (BLDP-Q) and Solid Power (SLDP-Q) illustrate how electrification themes are boosting industrial momentum.

Fintech & digital finance – resilience amid volatility

The Finance sector has 57% Bullish names, with strength concentrated in digital banks and cryptocurrency-adjacent companies. Our analysis highlights:

• Universal Insurance Holdings (UVE-N) – a small-cap insurer that has a 4-week return estimate of 4.8% and a 13-week estimate of over 18%.
• Nu Holdings (NU-N) – the Brazilian neobank continues to impress with consistent momentum.
• SoFi Technologies (SOFI-Q) and Riley Financial (RILY-Q) have both turned higher after extended declines, reflecting renewed interest in fintech after the correction earlier this year.
• Crypto-mining firm Terawulf (WULF-Q) and mortgage finance company LoanDepot (LDI-N) also make the Bullish list. While many of these names remain volatile, the sector’s breadth suggests that investors are selectively returning to riskier financial innovations as the cost of capital falls.

Counterpoint – Healthcare and Real Estate remain under pressure

Not all sectors are benefiting from the rotation. Healthcare and Real Estate are lagging, with over half of their listings (˜56 % and 54 %) in Bearish trends. Although Morningstar argues that healthcare offers some of the best value after a difficult year, momentum indicators remain weak. Down-trending names include agilon health (AGL-N), Telix Pharmaceuticals (TLX-Q), and Hudson Pacific Properties (HPP-N). Real estate investment trusts are sensitive to financing costs, and while upcoming rate cuts should eventually relieve pressure, the sector has yet to show sustained technical improvement. Healthcare’s weakness may reflect investor scepticism that small-cap biotech can weather a slower economy.

Portfolio strategies – ETF Bullish Crossovers w/Momentum underscores the defensive tilt

Stock Trends’ model portfolios provide an applied perspective on the themes discussed above. The Stock Trends ETF Bullish Crossovers with Momentum strategy, for example, currently holds 48 exchange-traded funds and had no trades in the week ending September 5, reflecting a stable allocation to existing winners. A review of its holdings shows how the portfolio leans into both hard-asset exposure and inflation protection:

• Metals and mining ETFs – The portfolio owns the VanEck Gold Miners ETF (GDX), SPDR Metals & Mining ETF (XME) and the Sprott Physical Platinum and Palladium Trust (SPPP), aligning with our observation that investors favour scarce resources and precious metals.
• Energy transition funds – Positions in the Invesco WilderHill Clean Energy ETF (PBW), Invesco Solar ETF (TAN) and Global X Lithium & Battery Tech ETF (LIT) highlight the portfolio’s commitment to renewable-energy and electrification themes. The United States Oil Fund (USO) balances this by capturing momentum in fossil fuels.
• Inflation-protected bonds and currency hedges – Significant allocations to iShares TIPS Bond ETF (TIP), Schwab U.S. TIPS ETF (SCHP), Schwab Short-Term U.S. Treasury ETF (SCHO), and Vanguard Short-Term Government Bond ETF (VGSH) provide ballast against rising prices and potential volatility. The inclusion of Invesco CurrencyShares Japanese Yen Trust (FXY) and Invesco DB US Dollar Index Bearish Fund (UDN) further diversifies currency exposure.
• Global equity diversification – The portfolio’s largest cluster consists of country and regional ETFs covering China (FXI, KWEB, CHIQ), Hong Kong (EWH), Europe (FEZ, FDD, EPOL, EWQ), Sweden (EWD), Spain (EWP), Switzerland (EWL) and the United Kingdom (EWU). These positions underscore the strategy’s embrace of international value and emerging-market opportunities during a period when U.S. valuations are stretched.
• Selective growth bets – A handful of growth-oriented funds—iShares U.S. Technology ETF (IYW) and Invesco S&P 500 High Beta ETF (SPHB)—indicate the strategy still participates in innovation-driven upside. However, these positions are modest relative to the heavy weighting in defensive and hard-asset themes.

Taken together, the ETF portfolio mirrors the rotation highlighted in this editorial. Heavy weights in materials, mining, precious metals, and clean energy, combined with inflation-hedging bonds and global diversification, illustrate how Stock Trends’ strategies translate macro narratives into actionable allocations. Investors reviewing their own holdings might compare them with these model portfolios to gauge whether they are appropriately positioned for an environment dominated by defensive growth and hard-asset momentum.

Putting it all together – using Stock Trends tools to navigate the cycle

Stock Trends’ framework emphasises discipline and statistics, not emotion. The Stock Trends Inference Model (ST-IM) integrates trend signals, momentum patterns, and volume statistics to generate probabilities that a stock will outperform benchmarks over four, 13, and 40 weeks. Investors can use Bullish Crossovers, Top Trending, Weak Bearish Breakout, and ST-IM Select reports to drill down into names that match their risk appetite. For example:

Readers should also consult the Bulls vs Bears and Trend Summary reports to monitor overall market sentiment and breadth. These tools, combined with thoughtful macro awareness and risk management, can help investors navigate an environment where defensive growth is in favour but volatility remains elevated.

Follow the leadership, respect the risks

The Stock Trends reports for September 5, 2025, reveal a clear rotation into hard assets and essential services. Materials and utilities show the strongest breadth and momentum, reflecting investor demand for inflation-resistant, cash-flow-rich businesses. Energy, industrials, and fintech follow closely, buoyed by secular themes like decarbonisation and digital finance. Conversely, healthcare and real estate remain under pressure despite upcoming rate cuts.

Macro-economic headwinds—high valuations, weakening labour data, and uncertainty around tariffs and inflation—mean this is not an “all-clear” rally. The Stock Trends Inference Model emphasises probabilities rather than predictions; investors should tilt toward the sectors where breadth is strongest while managing risk and keeping a watchful eye on macro data. As we move into the latter part of 2025, the ability to synthesize data from the Stock Trends Weekly Reporter with real-world news will be critical to staying on the right side of the market.