Reversal of February’s sector rotation trade heats up. Back in March of this year I highlighted the sector rotation trade unfolding in the equity markets. Of course, now the reverse is happening.
Regardless, spotting sector rotation trades is an easy way to make money buying stocks. Although this may be true, spotting sector rotations early is key to making money.
Due to the ongoing bull market in stocks, sector rotation trades are a sign that it’s business as usual. However, if you were to listen to Financial TV, like CNBC or Bloomberg, you’d think the world is ending. On the contrary, the Federal Reserve has engineered an environment where stocks will continue to soar.
To put it another way, stocks are the only asset class at the moment which have the potential to outrun inflation. So, expect more rotation trades into and out of the technology and financial sectors. Surely, the energy sector eft XLE (xle: nyse) fits into the sector rotation cohort as well.
Cash Moving Out of the Financial Sector (xlf: nyse)
Cash Moving into the Technology Sector (xlk: nyse)
Conclusion
In a word, stocks have a more room to the upside. Lot’s more! Regardless of what you hear on Financial TV, the current environment of ultra low interest rates is rocket fuel for stocks. In this case, the day’s of 10%+ corrections might be in the rear view mirror. After all, it took a global pandemic and economic shutdowns to cause the March 2020 30%+ correction in stock prices. To be sure, tweaking interest rates or tapering QE doesn’t have the same ring to it, wouldn’t you agree?
Be sure to check out the Ultimate Portfolio + page. Here you will find great stocks that are beating inflation big time!
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