With the Major Trend Index positive and the market about to enter the seasonally most bullish part of the calendar, we’ll offer both a trendy sector and a contrarian one for allocators looking to cap off an already good year. Specifically, we’d recommend heavy exposure to both the Information Technology and Financial sectors, which rate #3 and #1 in the October Group Selection (GS) framework.
But Information Technology rises to the top of the Domestic model, while the trend of Financials domination in the Global model remains intact.
Our Domestic Scores have five Financials groups rating Attractive; these same five industry groups are Attractive in our Global model. In total, seven Financials groups rank Attractive in the Global model, with insurance groups looking particularly Attractive.
There has been a lot of talk recently by PMs and market commentators citing Technology as the place to be. However, when the performance is disaggregated, it becomes clear that this broad sector does not in fact look so good. There are pockets of strength (like the Tech…Big Ten), but our message to readers is be careful.
- Our quantitative work on technology remains poor, and only a single tech subgroup—Technology Distributors—makes our current Attractive list. Per the Group Selection disciplines, there are currently no technology stocks in our Select Industries portfolio.
- Tech’s underperformance has helped restore better relative value to the sector, but valuations aren’t yet cheap enough for a big “reversion-to-the mean” bet.