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The S&P 500's winning streak has taken it to a succession of record highs. Amazingly, though, defensive stocks have been dominating the action.

These are stocks that investors turn to when the economic outlook isn't so hot, because they tend to provide stable earnings even when economic growth is uneven. People need soap, phone service, electricity and health care during good times and bad.

But what's interesting is that the market is rallying on a backdrop of economic optimism – on U.S. employment gains and a recovery in the housing sector, on Japanese efforts to eradicate deflation and signs that the euro zone has avoided a financial crisis.

Yet, since the start of 2013, three defensive sectors have dominated S&P 500 returns. Health-care stocks have gained 20 per cent, consumer staples have gained more than 16 per cent and utilities have gained 15 per cent.

Recent action tells a similar story. So far in the second quarter, telecom, health care and utilities have been the top-performing three sectors in the benchmark index. And with the latest market uptick on Thursday, telecom and health care led the way.

Stephen Wood, chief market strategist at Russell Investments, has noticed the trend. But he looks at it slightly differently: The Russell 1000 Defensive index outperformed the Russell 1000 index of large-cap stocks in the first quarter, and the difference between them has widened since then.

"As we return to quarterly earnings season, we continued to measure a creeping defensive posture within a rallying U.S. market …," he said in a note.

There are signs of caution outside the stock market indexes as well. In its most recent weekly survey of investor sentiment, the American Association of Individual Investors showed that bullishness has taken a big plunge.

The share of bullishness has fallen to just 19.3 per cent – down from 35.5 per cent the previous week and the lowest reading during the entire four-year-old bull market.

Conversely, bearishness has surged to 54.5 per cent in the current survey, up sharply from just 28.2 per cent the previous week.

The shift is so dramatic that some observers are doing double takes.

"Outlier readings like this make us wonder whether or not there was an error with the release," Bespoke Investment Group said in a note on their blog. "But if true it is yet another example of how investors are still anything but all in."

That's the bullish interpretation, at least. Prevailing caution suggests that there is a lot of money sitting on the sidelines, waiting for confirmation that the global economy is out of danger.

However, it also means that for all the hoopla surrounding the S&P 500 hitting record highs, no one is impressed. "What we have been observing is the manifestation of the underlying nervousness of financial markets," said Peter Westaway, chief economist at Vanguard Asset Management.

"I think you need to be careful not to over-interpret record highs in the S&P 500. In a way, the more surprising point is that it has taken five or so years to get back to where it was before the financial crisis."