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These 3 sectors could lead the market for the rest of 2018

Scott Gamm
Reporter

The stock market sectors strategists are bullish on heading into the end of the year may surprise you.

Alicia Levine, chief market strategist at BNY Mellon Investment Management, is bullish on health care, financials and consumer staples as we wrap up 2018.

Health Care

Much of that thesis stems from the outcome of the midterm elections, in which Democrats took control of the House of Representatives.

With that theme, Levine sees the Affordable Care Act remaining intact, which benefits the health care sector.

“Within health care, I like hospitals and HMOs (health maintenance organizations),” she said.

Some of the names within this specific area of health care include Centene (CNC) and Molina Healthcare (MOH).

“A bunch of Republican governorships turned over to Democrats from the midterm elections,” Levine said. “These Democrats are probably going to expand Medicaid in those states. I think the Medicaid HMOs will do well.”

According to Levine, when the government expands Medicaid, private companies manage it. “The government is essentially handing out money to private companies,” she said.

FILE- In this Nov. 8, 2018, file photo traders Eric Schumacher, left, and Richard Deviccaro work on the floor of the New York Stock Exchange. The U.S. stock market opens at 9:30 a.m. EDT on Friday, Nov. 16. (AP Photo/Richard Drew, File)

Financials

As for financials stocks, which are down over 4% so far this year, Levine notes their attractive valuations.

“The sell-off happened — and so now you go for what’s cheap and what has a good fundamental business,” she said, adding that bank stocks offer attractive dividends and are much stronger since the 2008 financial crisis.

After all, Warren Buffett’s Berkshire Hathaway (BRK-A, BRK-B) recently scooped up a whopping 35.6 million shares of JPMorgan Chase (JPM) in the third quarter.

Consumer staples

Levine is also bullish on the consumer staples sector, often viewed as a defensive sector that investors hide in during times of volatility.

“I’m playing defensive,” Levine said, referring to looming headwinds of Federal Reserve normalization and the possibility of no trade deal with China.

“If you’re worried about rates and slowing growth, I think staples outperform discretionary,” she said.

Consumer staples have been, well, a staple of the recent wave of stock market volatility that started in early October. The sector is up 3.5% since then, but down 2.3% since the start of 2018.

The consumer staples sector has shown to be a far better safe haven than many were willing to give it credit for,” David Bahnsen, chief investment officer and managing partner of The Bahnsen Group, told Yahoo Finance, referring to the boring, dependable and non-cyclical features of stocks within the sector.

Scott Gamm is a reporter at Yahoo Finance. Follow him on Twitter @ScottGamm.

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