Despite reporting strong third-quarter results recently, the share price of both Kerry Group and Glanbia have dropped this week.
The move lower in those companies’ stock price over the past few days, however, has more to do with wider market and economic sentiment than it does with how the companies are viewed by investors.
A move away from technology stocks had already started before the US mid-term election, and the results of that vote, coupled with a potential scandal at chip-giant Nvidia, has accelerated the rotation already underway.
Economists are forecasting that central banks will add to interest rate increases over the coming months, which will put further pressure on growth into 2027.
During times of uncertainty, stock market investors tend to move away from what are known as “growth stocks” (those which are expected to provide strong capital appreciation as the share price rises) to “defensive stocks” (those which provide a steady income from dividends with a more stable stock price).
Defensive stocks are companies in areas such as healthcare and utilities. Fundamentally, they are companies which provide services that customers will continue to need during an economic downturn, so will generally perform better than the wider market during such periods.
The rotation into defensive stocks, which has been underway over the last week, does not mean that there will be an economic downturn.
Right now, it just points to increased investor concern about the possibility that an economic slowdown could be on the cards.
For companies like Kerry and Glanbia, there is not a huge amount they can do about the short-term moves in the share price.
For holders of their shares, it might be unpleasant to see the price drop, but it is worth keeping in mind that the move has little to do with how well the company is performing.
