One defensive rally does not make a regime change. For me, confirmation would require persistence, breadth and fundamentals.
I would want to see defensives outperform tech for several weeks, not just during sharp risk-off sessions. More importantly, PG, KO, LLY, WMT and Berkshire should continue showing relative strength even when the broader market rebounds. That would suggest investors are deliberately reallocating capital rather than temporarily hiding from volatility.
Earnings also matter. If defensive companies deliver resilient earnings and guidance while highly valued AI names face slowing growth or further multiple compression, the rotation has a fundamental reason to continue.
Berkshire is worth watching as a signal too. If its huge cash pile continues moving into buybacks, acquisitions and equities, it could indicate that attractive opportunities are emerging outside the crowded tech trade.
My key test: if tech has a strong rebound but defensives refuse to give back their gains, the rotation is probably becoming something more durable.
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