Portfolio team increases defensive stock allocation to 18% amid rising oil prices

We shifted to more defensive stocks last week after Wall Street tightened expectations for AI names. The portfolio team opened new positions in utilities, consumer staples and healthcare to offset the high concentration in artificial‑intelligence tech. This move came as oil prices rose above $90 a barrel and Treasury yields climbed to their highest level in over a year, tightening the funding environment for high‑growth firms.

The rally in AI stocks began in late 2023, when earnings reports and product launches pushed shares of Nvidia, Microsoft, and other AI‑heavy companies above 20‑year highs. Investors praised the technology’s potential, but the pace of price gains outstripped earnings growth. Fed officials have signaled that interest rates will stay high longer than expected, and the recent uptick in oil prices has added pressure to corporate balance sheets. In this climate, many funds are re‑examining risk. The decision to buy defensive names follows a broader trend of reallocating capital from speculative tech to sectors that are less sensitive to interest‑rate swings and commodity price volatility.

In concrete terms, the fund added 1.2 million shares of a leading utility provider and 800,000 shares of a major consumer staples company, boosting the defensive allocation from 12% to 18% of the portfolio. The average price for the new holdings was $45, below the 12‑month high of $55. Portfolio manager Elena Ruiz said the change is “a strategic hedge against a potential correction in the AI sector and a response to the tightening of credit conditions.” The shift also aligns with the fund’s mandate to maintain a balanced risk profile while still capturing upside in high‑growth areas.

Looking ahead, the team will monitor Treasury yields and oil price trends closely. If yields begin to fall or oil stabilises, the fund may gradually re‑increase its AI exposure. Meanwhile, earnings season will provide clearer signals on whether AI companies can sustain their growth rates. By maintaining a mix of defensive and growth assets, the fund aims to protect capital while staying positioned for the next wave of innovation.