Defensive stocks safe but US bonds safer

NOT too long ago, the world was caught up in the "search for yield" story. The hypothesis is that developed countries with ageing populations will see slower growth, even as retirees need dividends to live on. Hence defensive yield stocks will be popular. A second leg to the story goes like this: Given a low interest rate environment where bonds return next to nothing, investors have no choice but to be in stocks, especially when rates eventually move up.

After the market collapse of the past month, the first story, arguably, still applies. A global consumer staples mega-defensive stock like Unilever, known for brands such as Dove soap, Lipton tea and Persil washing powder, is still trading at 20 times earnings. This is towards the higher end of its historical trading range. Locally, supermarket o…