Many are calling 1985 a stock picker's year, but I don't see it that way. Looking at the market in terms of themes or broad sectors there were some very strong performance divergences. For the year, Regional Banks, Medical Technology and Ethical Drugs were outstanding and in the fourth quarter, big classic growth stocks and technology stocks came on strong.
Our Financials Sector Ranking has been strengthening since August—well before the Trump Bump. The addition of Regional Banks to our SI Portfolio boosts our Financials exposure to an overweight 26% versus the S&P 500’s 15% weight. Reinsurance and Developed Diversified Banks are also among the Attractively-rated options for diversification within the sector.
Forces specifically driving many Financials groups include expectations for an ongoing yield rally and a steepening yield curve, tax cuts, and loosening financial regulation. While these outcomes remain largely speculation, the odds have improved and any of these developments would be a welcome change.
Small Biotech, Managed Health Care and Internet Retail continue to lead YTD.
Select Industries had no group deactivations again this month, but we trimmed a few groups and added Commodity Chemicals. All group holdings currently rate Attractive. Global Industries had no changes. Emerging Electric Utilities, which we added last month, was the second best performing group in March.
Select Industries had no group deactivations this month, and we made no significant changes to our group weights. All group holdings currently rate Attractive. Global Industries eliminated our longest tenured group, Regional Banks, which we held for two years. We added Emerging Electric Utilities, which is our first EM oriented group since June 2013.