As temperatures rise on Wall Street, traders are starting to think rotation. Summer’s here, and with that seasonality is the word du jour with pros. David Lutz of Stifel has 3 ways to play the summer trends that could boost your portfolio while barbecues and sandlots heat up.
First up on Lutz’s summer shopping list are Utilities. One thing that must be battled in the summer in Lutz’s mind is “the theory of the ‘sell in May, and go away trade,’” and investors need to play defense. “Utilities have obviously been one of the areas that have picked up by funds because it tends to be a defensive sector.”
One concern that could bite investors in utilities are rates. As long as rates stay about where they are, investors hunting for yield will find the sector pretty attractive. If rates start pushing higher, the sector will be unattractive to “yield tourists” and utilities could get hit.
Another defensive summer sector for Lutz, because “at the end of the day health care has been picking up and you can start seeing some tailwinds as people become more comfortable with Obamacare.”
In addition, increasing M&A in the sector has been a boon for stocks, (including acquirer share prices too). Lutz also believes we may have seen the bottom in once booming biotech, and if new buyers come in the whole health care sector will likely benefit.
One of the most hated sectors from a seasonality point of view, Lutz says technology could see a boost this time around. Despite higher beta names getting stung in summer, Lutz notes he “tends to like to go where everybody hates, right now no one seems to like the technology sector.” It’s a contrarian play, just like financials would be too in this environment.
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