As summer winds down and everyone gets back to work it might be time to take a look at your portfolio for the medium term and rotate in and out of some sectors. Brian Belski, chief market strategist at BMO Capital Markets has three sectors he’s particularly bullish on.
Unless you’ve been living under a rock for five years you know that financials have consistently underperformed the market as it has surged higher since the lows of the crisis. “Bull markets really do not have withstanding power without financials,” Belski notes. The fact that the market has gone so much higher without them should make investors pretty bullish going forward he thinks.
Belski says the problem for financials has been investor fear and emotion, neither of which is something to actually trade on. Rather, “it should be through fundamentals and fundamentals are saying that going forward regulations will ease.”
Industrials and tech
Given the bullish stance on financials Belski says two of the major benefactors of such a move would be industrials and tech. “Commercial lending...will fuel the capital expenditure increases coming back to North America.” More spending by American corporations can only mean good things for these two sectors and Belski thinks this is where earnings and economic growth will be coming from in the next three to five years.
Not so hot sectors
As a bonus Belski offers utilities and consumer discretionary as two sectors to avoid here. “Utilities are the most expensive asset in the world,” he says. As for consumer discretionary he notes those names have gotten beaten up pretty good. While media names within the sector are showing some strength he says retailers are still struggling and that’s enough to avoid the sector as a whole.
- BMO Capital Markets