Market and Sectors

Strange market, this is.

 

On last week’s Barron, it is noted that even if you are right on every macro economic turn this year, your return is meager 5%.   The reason is that, IMHO, it is not enough to be right about the market; one has to be right about the sectors as well.   When one sector catches fire, people simply buy everything in the sector indiscriminately. In agriculture business sector for example, any company with potash in its name went up, even though I bet most people (me included) still do not know exactly what the heck potash is.  So, in order to trade profitably for the time being, one has to answer at least two questions, where is the market?  And where are the sectors?

 

The market is in an uptrend, at least for now.  The earning thus far is a mixed bag, but it basically confirmed the expectation that even if we have a recession, it should be short and shallow and the worst is over.  If you ask me why the market went up so much today, rising dollar/lower energy, jobless claim etc aside, I believe the reason is that more and more professional investors turned into bulls.  Yesterday, we heard people from legg Mason said the worst is over, and those peoples are value oriented investors, and I think those people hold more sways to the market than any economic indicator. 

 

After market closing, MSFT disappointed, this is not the same as AAPL yesterday; this is real disappointment.   Will this impact market tomorrow, it might, but I believe right now it is the market against MSFT, and I think Market will win this time.  Even if tomorrow we have a down market, I believe the loss will be minimal.

 

Sectors wise, the premise is that FED is done (or near done) with the rate cut.  So, Dollar will be firm and Consumer as well as economy will be fine (at least that is the assumption).  Thus, commodities will suffer. Oil, Coal, Agriculture and related industries will have mini correction, especially considering all of them have gone up so much.  Bond, foreign currency and Gold/Silver probably will not fare much better.   On the other hand, Technology, consumer discretion will be the new stars.  If you are aggressive, I believe Home builder, Financial could be rebound from here as well.  Then, there is ChinaJ.   Because china has been down so much based on the assumptions of slower growth; and those assumptions are no more, thus, the curse has been lifted.

 

Anyways, good luck