Latest / Bull Market Conversations with Fexingo: Rallies, Momentum, and Riding Market Strength / How Bull Markets Create Their Own Defensive Sectors
Transcript
- Lucas: So we talk a lot on this show about how bull markets don't just lift all stocks equally — they actually reshape the rules of what counts as defensive. And I think we're seeing a textbook example of that right now in June 2026. Luna: You're looking at the cybersecurity names, aren't you? CrowdStrike, Cloudflare, Datadog — they've all been on a tear this week. Lucas: Exactly. CrowdStrike up nearly ten percent in the last five days, Cloudflare up over ten percent, Datadog up thirteen and a half. And this is in a market where the S&P 500 is up less than one percent over the same period. These are not traditional defensive stocks — they're high-growth, high-multiple names. Luna: Right — conventional wisdom says defensive means utilities, consumer staples, healthcare. Things people buy regardless of the economy. Not software companies trading at fifty times earnings. Lucas: But look at the context. The economy is still growing — real GDP growth annualised at 2.1 percent, which is up from just 0.5 percent a few quarters ago. The Fed is on hold with the funds rate at 3.63 percent. There's no recession scare. So investors are asking: what's the real risk to a portfolio right now? And increasingly, the answer is 'not being in the parts of the market that have structural tailwinds.' Luna: And cybersecurity has that. Every company, every government, every hospital needs it. It's not discretionary — it's a necessity. Lucas: That's the key insight. These stocks are behaving like defensive plays because their revenue is recurring and mission-critical. CrowdStrike's subscription model means visibility into future cash flows. Cloudflare's network effect makes it harder to replace. So when the market gets a bit jittery — and even in a bull market, you get those moments — money flows into names that have both growth and resilience. Luna: It's a fascinating flip. In 2020, these were pandemic beneficiaries. Then in 2022, they got crushed when rates rose. Now in 2026, they're being re-rated as quasi-defensives. Lucas: And the data supports it. Look at the Russell 2000 — up just half a percent in five days. The NYSE composite, which is more old-economy, up 1.2 percent. But the ARK Innovation ETF, which holds a lot of these high-growth tech names, up four percent. That's a clear signal that risk appetite is selective. Investors aren't piling into everything — they're piling into the names that can compound regardless of the macro environment. Luna: So how do you square that with the traditional defensive sectors? Utilities are yielding what, three percent? That's barely above cash. Lucas: Right, and that's the problem. With the ten-year Treasury around 4.2 percent — we don't have the exact number today but it's in that zone — utility dividends don't offer enough of a premium to justify the interest rate risk. If rates stay here or go higher, utilities could get hurt. But a company like Cloudflare? It doesn't compete on yield. It competes on growth, on market share, on the fact that its customers can't afford a data breach. Luna: And the multiples reflect that. Cloudflare at 247, CrowdStrike at 746 — these are not cheap stocks by any traditional metric. But in a bull market that's been running since October 2022, the question becomes 'cheap relative to what?' Lucas: That's exactly the framing. And I think this is where the idea of 'bull market defensives' becomes really useful. In a sustained uptrend, the biggest risk to a portfolio isn't a correction — it's being underinvested in the compounders. So defensive becomes about protecting against opportunity cost, not just drawdowns. Luna: That's a subtle but important shift. It's almost like the bull market creates its own definition of safety. Lucas: It does. And we saw this in the late 1990s too — tech stocks became the new bond proxies because their growth was so reliable. Then it ended badly, of course. But the structural story here is different. Cybersecurity spending isn't cyclical in the same way that, say, enterprise software was in 1999. It's driven by threat volume, which only goes up. Luna: And regulation. Europe's NIS2 directive, the SEC's new disclosure rules — these create compliance mandates that force spending. Lucas: Exactly. So the bull market is rewarding stocks that have both a growth narrative and a structural demand floor. That's a powerful combination. And I think it explains why a name like Datadog — which monitors cloud infrastructure — is up thirteen percent in a week when the Nasdaq is flat. It's not just momentum. It's a recognition that these companies are becoming indispensable. Luna: But does this change how you build a portfolio? If growth-defensives are the new utilities, do you still need traditional defensives at all? Lucas: I'd be cautious about abandoning them entirely. The market can change quickly. But I do think the weight has shifted. If you're a long-only investor today, you probably want more exposure to these structural growth stories than you might have five years ago. And you want to be selective about which traditional defensives you hold — maybe healthcare over utilities, for instance. Luna: And healthcare is interesting because it also has that non-discretionary spending characteristic, but with less interest rate sensitivity. Lucas: Right. So the bull market is really forcing a re-evaluation of what 'defensive' means. It's not a static category. It evolves with the economic and technological landscape. And right now, the market is telling us that cybersecurity and cloud infrastructure are the new defensive trenches. Luna: It also makes you think about risk in a different way. If you're underweight these names, you're taking on a different kind of risk — the risk of lagging. Lucas: Exactly. And that's the kind of conversation we love having on this show — really thinking about the frameworks we use to invest. If our discussions have helped you see the market in a new light, we'd love your support. It's what keeps Bull Market Conversations independent and ad-free. You can find us at buy me a coffee dot com slash fexingo. Luna: It's a small way to help us keep digging into these angles. And we truly appreciate every bit of support. Lucas: So back to the theme — I think the key takeaway for listeners is this: in a bull market, don't assume that yesterday's defensive sectors are today's safe havens. Look for stocks with structural demand, recurring revenue, and pricing power. Those are the new trenches. And right now, cybersecurity is the deepest trench of all. Luna: And keep an eye on the data. If the economy stays resilient, these growth-defensives could continue to lead. But if we see a sharp slowdown, the old utilities might make a comeback. Lucas: That's the part that keeps it interesting. No framework is permanent. The bull market writes new rules, but it can also rewrite them. We'll be watching.