While American stocks have been in a bull market for four years, defined as an advance unbroken by a decline of 20 percent of more, stocks have frequently retreated. The rally has lasted for 49 months and 16 of them have generated losses.

Shares in the benchmark gauge for American equities slipped 3.3 percent from April to June last year, 0.4 percent in 2011 and 12 percent in 2010, three of the five quarterly losses since equities bottomed in March 2009. Industries with earnings least reliant on expanding gross domestic product generated the best returns each time as technology companies and banks fell.

Investors have fewer choices now after defensive industries, normally what fund managers buy when they are concerned about growth, are trading at a 26 percent valuation premium to the rest of the market. Johnson & Johnson, the largest seller of health-care products, has rallied 17 percent this year, the third-best gain in the Dow Jones Industrial Average. Alcoa has the second-worst decrease, falling 5.1 percent.

‘Very Cautious’

“We’re being very cautious,” Chad Morganlander, a Florham Park, New Jersey-based fund manager at Stifel Nicolaus & Co., said in an April 5 Bloomberg Television interview. His firm oversees about $130 billion of assets. “You’re not seeing the self-sustaining lift that we need to have the market go from 1,550 to 1,750.”

Morganlander, who predicted in December that stocks would increase this year, said he’s raised the level of cash in his funds to 18 percent and is buying bonds.

The U.S. economy will expand at a 1.9 percent rate this year, down from 2.2 percent in 2012, according to the median estimate of 83 economists in a survey by Bloomberg. The forecast for a 1.8 percent earnings contraction in the three months ended in March compares with a prediction for a 1.2 percent gain at the start of the year.

New Buyers

Higher price-earnings ratios for defensive stocks are no reason for the rally to fizzle, according to John Stoltzfus, chief equity strategist at Oppenheimer & Co. Rather, they may reflect individuals returning to the equity market for the first time since 2007 who want to keep their investments conservative.

“If you’re coming back to the market, if you’re layering in and building a portfolio, you start to come in with consumer staples, health care,” he said in an April 3 interview on Bloomberg Television’s “Surveillance” with Tom Keene, Sara Eisen and Nela Richardson. “You have a real improvement in fundamentals, and that’s driving stocks higher.” He predicts the S&P 500 will climb to 1,585 by the end of the year.