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B of A Securities’ widely-read monthly survey of global portfolio managers uncovered health care, the United States, commodities, technology and cash as the biggest current overweights relative to the historical averages. One of these – commodities – is not like the others.

The other four asset classes – cash being the most obvious example – are defensive in one way or another. Health care stocks are among the least sensitive to the pandemic-related economic slowdown so that sector has defensive qualities.

Technology stocks are generally expensive and may not seem defensive at first glance. However, Credit Suisse Jonathan Golub noted that the current situation bears little resemblance to the heights of the late-1990s technology bubble.

The largest five tech companies make up 22 per cent of the benchmark now, a larger proportion than the S&P 500′s largest five formed before the tech bubble burst (18 per cent). But, the current top five make up a far larger percentage of overall index earnings growth – 14 per cent versus 9.3 per cent. Relative to the benchmark, the big five now generate far larger earnings growth.

Apple Inc., Microsoft Co., Inc., Alphabet Inc. and Facebook Inc. will never be confused with deep value stocks. However, as the most dependable source of market-beating profit growth, they also have defensive aspects.

Regionally, the U.S. is where global portfolio managers park assets when they’re nervous, which is why the U.S. dollar tends to rise along with the CBOE Volatility Index. American equity and bond markets are the most liquid and diversified so, relative to emerging markets and the rest of the G-10, are viewed as a safe haven.

Commodity prices aren’t defensive at all. They’re volatile and entirely dependent on an uncertain global economic future.

China, as the first economy to work through the initial stages of the COVID-19 outbreak and the source of about half of global demand for most major commodities, is clearly boosting optimism in resource sectors.

The resurgence in commodity demand will have to spread beyond China for the portfolio manager overweights to pay off significantly. The second wave of U.S. COVID-19 dispersion in the U.S., for instance, is a threat to continued rallying in commodity sectors.

The fund manager bullishness on resources is a non-defensive anomaly that likely signals an initial market gamble on the post-pandemic economy. A sustained rally in commodity prices would encourage investors into other cyclical sectors like industrials and consumer discretionary, so resource prices remain an important indicator to follow in the weeks ahead.

-- Scott Barlow, Globe and Mail market strategist

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Stocks to ponder

Granite Real Estate Investment Trust (GRT.UN-T) offers investors a yield of 4 per cent and has a conservative payout ratio. Toronto-based Granite owns industrial, warehouse, logistics and development/land properties across North America and Europe. It has a healthy balance sheet, providing downside protection during the coronavirus pandemic as well as offering growth potential as its capital is redeployed. It also has been producing double-digit returns this year. Jennifer Dowty takes a deeper dive (For Globe subs)

TFI International Inc. (TFIIT-T) offers package and courier service, truck haulage, logistics and other transportation services. The Montreal-based company’s first-quarter results were impressive, as they benefited from increased demand for its trucking and delivery services as the coronavirus pandemic gripped the economy. Gordon Pape has more (For Globe subs)

The Rundown

Canadian ESG companies are posting promising results but there’s a surprising reason for it

Evidence shows more people are repositioning their portfolios to include sustainable stocks and funds. These are referred to as ESG (environmental, social and governance) securities. There is evidence that ESG investing can be profitable. But you may be quite surprised by how the best performing ESG funds have accomplished the feat. Gordon Pape has this story (For Globe subs)

Find someone who sells advice, not products

Don’t know who to trust with your investing? Avoid brokers and banks, says Rob Carrick in this response to a reader question. These outlets are ultimately sales operations, designed to get clients to buy products. The chances of getting professional financial planning and advice are better if you go see a fee-for-service financial planner. (For Globe subs)

Why investors should hang on to their big tech-stock winners

Tech has gotten pricey, but so has just about everything else. That’s the conclusion of Ian de Verteuil, head of portfolio strategy at CIBC World Markets. Several other sectors are now even more expensive than tech when measured against their own historical norms, he said in this story by Ian McGugan. (For Globe subs)

Others (for subscribers)

Wednesday’s analyst upgrades and downgrades

Wednesday’s Insider Report: CEO tops up position in this stock yielding 9.8% as it nears oversold territory

Tuesday’s analyst upgrades and downgrades

Tuesday’s Insider Report: Company leaders pare positions in gold and silver stocks

Number Cruncher: Momentum investing without the added volatility? Check out these 10 TSX stocks

Others (for everyone)

Silver refuses to be left behind by gold’s bull run

Gold’s coronavirus rally expected to continue as pandemic persists, poll shows

Globe Advisor

Investors need to decide whether the risk of inflation is real

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Ask Globe Investor

Question: What are the TFSA rules when young Canadians are out of country in the U.K.?

Answer: Non-residents of Canada may not open a TFSA, but they can keep one that’s already open. No new contributions are allowed while they are abroad and contribution room does not accumulate. They can make withdrawals, but they can’t replace those funds while still abroad. Also, there may be tax liabilities for withdrawals, depending on the country in which they reside.

--Gordon Pape

What’s up in the days ahead

David Rosenberg isn’t liking what he’s seeing in the high yield bond market right now. He’ll explain further.

Click here to see the Globe Investor earnings and economic news calendar.

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Compiled by Globe Investor Staff

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