Breakout

3 sectors to watch in an aging bull market

Another strong day for the market (^GSPC) yesterday has traders in better spirits after an ominous start to the week. Bullish comments by Janet Yellen on Wednesday helped, but one can’t help but feel we’re still in uncharted territory, with most market veterans seemingly grasping at straws to determine where we are in terms of the current bull market.

Many believe we are in the midst of an ongoing bull. Paul Schatz of Heritage Capital is one of these prognosticators, but senses our current bull market is getting close to be sent out to pasture. “The Bull market is old, and it’s wrinkly, but it’s not over yet,” Schatz opines in the attached video. “The bull market is transitioning to its final phase which is normal, bull markets don’t last forever.”

With that in mind, there are 3 sectors Schatz likes as the current bull market heads off into the sunset.

Energy

“We’ve waited a long time for [the] energy [sector] to percolate,” he says. “The time to own energy is in the last phase of the bull market, and you can see right now as stocks have come down over the last couple of weeks, energy has held on really well. That’s the first glimmer of hope I’ve seen in a long time that energy is ready to take on a leadership role. “

Consumer Staples

“As the economy slows, people begin to look for the soaps the Cloroxes, the Palmolives, etc.,” and that will continue Schatz says. The one wrinkle to this traditional tactic in the “getting defensive” playbook is that these days the consumer staples companies have lots of international exposure, which brings added risk to these names.

Commodities

“Commodities now have an emerging market tilt to them as we know,” he says, and believes that in the 2nd half of this year the emerging market countries will really lift off with growth, thus powering the commodities names higher.

Schatz suggests playing commodities through the PowerShares DB Commodity Index (DBC). In fact, the top play in Schatz mind is to go long commodities and emerging markets in the 2nd half, and short the small caps in the Russell 2000 (^RUT).

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