Time to play defense, Citi global strategist says

The case for defensive stocks

Global jitters that caused an equity market selloff in February were a major boost for defensive stocks. Robert Buckland, Citi's chief global equity strategist, says to stick with these safe-haven trades for the rest of the year.

"It's right to be kind of bullish when others are bearish and start to back off a bit when others are getting bullish," Buckland told CNBC's "Fast Money Halftime Report" Tuesday. He recommended "buying the dip" in February, and the S&P 500 has gained more than 8 percent since.

Defensive sectors, those that provide constant dividends and stable earnings despite market moves, have outperformed strongly since their peak before the financial crisis, according to Buckland. He cited comparable EPS, strong dividend growth, less dividend cuts and lower volatility when compared to broader market.

His S&P target for this year is 2,150, and Buckland says there's still room for the upside. The S&P meanwhile traded near 2,073 Tuesday.

"I can't be as bullish as I was in February but I still think there's a little bit more juice in it left," Buckland said, adding that it's not nearly as attractive as it was with "a contrarian call" earlier this year.

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Defensives, Buckland said, can be expensive against other equities. They're an increasingly crowded trade, with sustained dividend growth and no history of dividend cuts. But they're cheap against bonds. Citi's defensive equity index yield is 2.7 percent, compared to global government bonds yielding 0.8 percent.

As far as rate hikes, Buckland is anticipating one or two hikes this year. Yet, the market might not be sure how to price them in.

"Is it bad news because they're hiking? Is it good news because they're hiking because the economy's better?" he said.

Buckland and his team at Citi recommend defensive equities for multi-asset portfolios. For equity-only portfolios, staying underweight defensives can be dangerous, according to his note from Citi.

Presidential elections, Buckland said, are sure to add to market uncertainty and could boost defensive stocks.

"I think that puts a cap on where we think markets can go from here," he said.