|UNKNOWN||STOCKS & ETFs||_N/A|
Sectors with the best value right now? A couple of weeks ago, low volatility areas had been underperforming significantly. Markets have been strong since the Trump election, up 10%, 15%, 20% depending on where you look and what sectors. Low volatility sectors like utilities, consumer staples have underperformed. Those sectors, right now, screen as cheap because they are much more defensive. What typically happens with fund managers, is when they are positive on the outlook for the market, they are investing in more cyclicals; whether consumer, industrial or technology, companies that are going to get much more of a beta lift when the markets are doing well. When the markets are expected to correct, they can’t go to cash, most managers have to stay fully invested. They sell their consumer cyclical and they buy a consumer staple; they sell their industrial and buy a health care; sell their financial and buy a utility. This takes down their beta or their sensitivity to the downside. The low volume sectors are somewhat attractive right now compared to some of the more cyclical sectors.
Larry Berman CFA, CMT, CTA
Chief Investment Officer, Partner, ETF Capital Management Inc. http://www.etfcm.com