Investors should be positioned “more defensively” in their portfolios right now, partly because of how expensive markets are, said portfolio manager Brian Arcese. Shares are still expensive despite market volatility and stocks diving in the past few weeks, said Arcese, who works at Foord Asset Management. Arcese, who is also an equity analyst at the firm, said that shares — excluding information and telecommunication — are trading at more than 18 times 2024’s earnings per share. That’s 10% to 12% above the long-term average and “in the face of slowing growth,” he said. He noted that this is “one of the narrowest equity markets in history,” with U.S. tech shares mostly fueling the rally. Both valuations and economic indicators are “flashing amber lights,” said Arcese. Leading indicators such as auto loans and credit card delinquencies have been showing signs of worsening for many months, on top of weak U.S. housing data such as unsold U.S. housing supply, he noted. The formerly resilient U.S. labor market has also begun to slow, with job openings declining and the unemployment rate increasing, Arcese said, adding that the latter is “typically a sign an economy has already slowed materially.” Against that backdrop, he is focusing on companies with “defensive growth,” he told CNBC’s ” Street Signs Asia ” last week. “You have to take risks somewhere. You have to invest somewhere. But in our minds, it makes sense to position slightly more defensively, given how expensive markets are currently, given how expensive U.S. technology is in particular, and given the risks that we see in the market in general,” Arcese said. “And the positive is that, in our minds, at least, you don’t have to give up growth in order to position your portfolio defensively,” he added, saying that it’s possible to invest in such companies that still grow at double-digit rates. Such stocks might be “less exciting” than artificial intelligence-driven companies or those with AI-driven growth, but they still grow at double-digit rates and are “far more defensive,” he pointed out. Examples that he gave are health-care and utilities companies. Stock picks Arcese named four such stocks that he likes. Roche : Arcese noted that the Swiss pharmaceutical company’s revenue growth exceeded estimates by 1.5%, driven by strong performance in its pharmaceutical and diagnostics units. “We favor the company due to its methodical approach to R & D spending, terminating trials that lack economic viability,” he said. SSE : Arcese says the renewables firm has a “high quality power portfolio” that includes a mix of wind, hydro and thermal assets. “This company offers diversification to our portfolio and is not dependent on energy prices,” he said, adding that it’s trading at an attractive multiple of 11 times price-to-earnings. Edison International : Arcese says this utility firm is trading at a 20% to 30% discount to the S & P 500, depending on whether tech is included or excluded. Logista: He says this distributor of tobacco products offers “excellent defensive growth.” “The firm’s business is incredibly stable, supporting a dividend yield of 7%+ that grows at least in-line with inflation,” he said, adding that its dividend has grown more than 10% annually over the past five years.