UBS Advises on Defensive Stocks Amid Market Uncertainty
The S&P 500 has made a notable recovery since its low in April, but UBS suggests that investors should consider adding defensive stocks to their portfolios to navigate ongoing uncertainties. In a report released on June 6, UBS Global Equity Strategist Andrew Garthwaite expressed his cautious outlook, particularly regarding cyclical stocks, which tend to fluctuate with the economic cycle.
Garthwaite pointed out that UBS forecasts a slowdown in GDP growth, projecting a decline from 2.1% in the first quarter to 0.9% by the fourth quarter. This expectation is backed by notably weak soft data in the U.S., which has dropped more sharply compared to hard data. Despite a strong stock market recovery following the announcement of significant tariffs in April during the Trump administration, several challenges remain. For instance, the U.S. budget deficit hit $316 billion in May, totaling $1.36 trillion for the previous year. Moreover, the trade policy framework between U.S. and Chinese officials is still awaiting approval, and uncertainty persists regarding the Federal Reserve’s upcoming interest rate decisions.
This context highlights the importance of a defensive approach. Garthwaite noted that cyclical stocks appear relatively expensive when compared to defensive ones, based on various pricing metrics. His team identified several stocks within the S&P 500 that are worth considering. “On the defensive side, we are looking for names that carry low leverage to mitigate the risks associated with rising bond yields,” Garthwaite mentioned. Additionally, many of these stocks offer dividends, which can provide a cushion against market volatility.
One strong candidate that Garthwaite’s team highlighted is Johnson & Johnson. The company’s stock has risen over 7% in 2025, with a dividend yield hovering around 3.4%. According to LSEG, analysts are generally optimistic, anticipating an increase exceeding 9% from current price levels. Recently, Goldman Sachs elevated the price target for Johnson & Johnson from $172 to $176, placing it on their conviction list. In their May report, Goldman remarked that JNJ is a stable, defensive grower supported by a robust balance sheet, enhancing its return on invested capital. They noted the company has significant revenue opportunities in treating various cancers and other diseases.
In addition, PepsiCo has also been on the radar, with continuous quarterly dividend increases and a broadening product line, further illustrating the benefits of resilient stocks in today’s market environment.
