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Is the stock market entering a more defensive phase with “safe” sectors such as consumer goods set to outperform for a while? Looks like it to me on the recent data on which sectors have turned hot and which are cooling off.

(See my October 1 post for some of that data.)

And I got more confirmation from the big pop shares of “safe” PepsiCo (PEP) got this morning after an upgrade from Deutsche Bank. The upgrade wasn’t huge–the bank raised its 12-month target price to $70 from $66–but the stock is up $2.47 a share or  4.2% as of 12:40 p.m. (ET) on what isn’t particularly striking news. To me that shows that there are a lot of investors out there who, right now, want to lower their risk but stay in stocks.

I’m going to raise my target price on this evidence that safe consumer stocks are back in favor.

In raising its target price Deutsche Bank cited its reading of a recent filing by PepsiCo with the Securities & Exchange Commission that implied lower interest expenses and lower depreciation than they had expected as a result of PepsiCo’s acquisition of bottlers PepsiAmerica and Pepsi Bottling Group. As a result the bank raised its 2010 earnings forecast to $4.20, an increase of 4 cents. (See I told you this wasn’t exactly earth-shaking news.)

More importantly Deutsche Bank also said that they think there could well be more increases to earnings estimates ahead from a potential tailwind from a weak U.S. dollar and lower costs for key raw materials. With investors getting edgy about prospects for earnings growth in the fourth quarter and in 2010 that’s a compelling story.

As of October 2, 2009, I’m raising my target price for Pepsico to $68 a share by June 2010 from my previous target of $62 by March 2010.