Shelley Moen, Senior Market Strategist at Vermilion Technical Research, recently came on Financial Sense Newshour to discuss market trends. Here are a few important highlights from the interview:
With summers typically a slow time for the market, earnings season coming up, and stocks currently priced for perfection, Shelley expects a pullback and buying opportunity ahead.
Utilities are the strongest sector so far this year. Typically, this reflects active investors positioning ahead of a market or economic downturn given their relatively stable earnings and dividend payouts. Given how low rates are, Shelley believes that utilities have now become the “haven for yield” and no longer reflect purely defensive positioning.
Although the economy was much weaker in the first quarter than most expected, Shelley says the strong performance of transportation companies, i.e. “transports”, reflects ongoing economic improvement. That said, given the continual slow pace of growth, this “may keep the Fed not reacting vigorously [i.e. raising rates] for a long period of time” as we also noted recently (see story).
Pension and endowment funds have the lowest equity exposure since 2009. She believes, at some point, “there is going to be a massive switch to equities…out of bonds” and sees “equities with high yields becoming a kind of bond proxy” for tactical allocation funds.
As far as individual sectors and areas of the market go, Shelley says to stick with health care, tech, and industrials. Not sure about energy given the uncertain geopolitical component.
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