The stock market's decline script is fully staged! Are we back to the Internet bubble era?

The major US stock indices have been falling continuously for three days in a straight line, triggering a sell-off due to a series of weak economic data. Investors are questioning whether the Federal Reserve has missed the best time to cut interest rates, and whether it is now too late to avoid a recession.

The script of the stock market's decline is playing out in full swing, with suddenly panicked investors seeking to actively reduce the risk of their investment portfolios due to concerns about an economic downturn.

As the indices retreat, the Nasdaq 100 index has entered a correction zone, with calls for an emergency rate cut growing louder.

However, this does not mean that every sector of the stock market is suffering. Despite the S&P 500 index falling by 5% since last Thursday, three industries within the index have maintained positive growth: real estate, utilities, and consumer staples. These are seen as safe choices during market turmoil, performing well amidst investor anxiety.

Similarly, bonds are also favored. US bond yields are at annual lows, prompting traders to take defensive measures by buying government bonds.

Here are four sectors in the market that are performing well, clearly indicating that investors are playing out the recession script:

Defensive Stocks

Investors are putting their money into defensive stock sectors, such as consumer staples and utilities, which typically perform well during economic difficulties.

Since last Thursday, the consumer staples and utilities indices in the S&P 500 have risen by 0.7% and 0.3% respectively. According to Bloomberg data, these are among the few sectors that have seen growth in the past three trading days, while other areas of the market have fallen by as much as 10%.

David Sekera, Chief US Market Strategist at Morningstar, stated in a recent report, "With US economic growth expected to slow in the second half of 2024 and 2025, investors are seeking the stability of defensive stocks to prepare for a potential economic downturn."

Dividend Stocks

Dividend stocks are also becoming increasingly popular, as another common means of coping with an economic recession.

Utility stocks that typically pay dividends have outperformed the entire S&P 500 index in the past few trading days, while the iShares Global Utilities ETF has risen by 12.7% since the beginning of the year.

Government Bonds

US bonds saw a sharp rise on Monday as traders anticipated a significant rate cut - a typical policy move by the Federal Reserve in response to recession risks.

With the rise in US bond prices, bond yields reached their lowest levels in a year. The 10-year US Treasury yield fell by 10 basis points in early trading, while the 2-year US Treasury yield fell by 16 basis points.

David Rosenberg, Chief Economist at Rosenberg Research, stated in a report on Monday, "There is a flight to safety in the bond market. For those who are macro optimists, I have a message for you: the bond market is warning you that some not-so-good things are about to happen."

Selling High-Growth Momentum Stocks

Investors are divesting high-growth momentum stocks from their portfolios, especially in the technology sector. This week, the Nasdaq 100 index fell further into correction territory, with the tech-heavy index down 12% over the past 30 days.

Meanwhile, the information technology index within the S&P 500 index has dropped 9% in the past three days.

Rosenberg wrote, "The tech bubble, just like in 2000, is in the process of bursting, back then it wasn't just internet companies, the entire industry was swept up by the internet boom; now it's the artificial intelligence frenzy. Just as we saw routers, cables, and fiber optics in the late 1990s, anxiety over overinvestment in artificial intelligence is forming, and the contrasting results are clear."

However, some forecasters believe the outlook for a recession remains uncertain. Ned Davis Research pointed out in a report that while the slowdown in the U.S. job market looks worrisome, the weakness in the latest employment report may have been exaggerated due to recent weather events, which temporarily led to approximately 416,000 workers losing their jobs.

Analysts discussing market expectations for rate cuts said, "If the U.S. economy falls into a recession, or if inflation drops below the Fed's 2% target, pricing next year makes sense. While we may reach such a scenario, this is not our current forecast."