There’s a big sector rotation taking place. And WealthPress Senior Strategist Roger Scott is here to discuss stock market sector rotation strategies — and two hot stocks to watch.
Since moving your money into momentum plays can help you beat the stock market, let’s break down how money rotates between sectors…
Financials and industrials are leading the pack right now. But Technology, Consumer Staples and Utilities are lagging among the major sectors.
Here’s what’s interesting about this…
Consumer Discretionary and Tech often trade in step with each other… much like Utilities and Consumer Staples or Industrials and Materials. They’re like opposite sides of the same coin!
But when Consumer Discretionary gets out of line with Tech, we get a fragmented stock market.
As in, something isn’t right. For instance, right now, the Nasdaq-100 is trading below its 50-day moving average. This suggests things aren’t running as they should.
So what does it all mean? And more important, as a trader, what are some stock market rotation strategies you can follow?
You don’t want to throw your entire nest egg into an index such as the S&P 500. Unless, of course, you want to make average returns.
Instead, you want to select sectors where you can be long and short. So, if you’re holding the S&P 500 and think you’ll have the best stocks in the best sectors just by holding the entire index, that’s not the case!
Over the past six months, for example, you would’ve made a measly 1.31% in consumer staples. But in energy, you would’ve made a solid 38%!
So imagine if, over the past three months, you only held energy, financials, industrials and materials. Your portfolio would be up about 28% to 30%. Whereas if you held the entire S&P 500, you would have some stocks that only gave you 6%, 7% or 10% returns.
This is why having stock market sector rotation strategies is so important if you want to maximize your returns.
By taking specific sectors that are moving higher and focusing on them while ignoring those that are lagging, you can put yourself in a winning position.
But there’s more…
What if you bought calls and went long on the bullish sectors, and then sold the weakest sectors short? You could make money from the market going both up and down at the same time!
The bottom line is that, right now, you don’t want to be in health, technology, utilities and consumer staples. Rather, you want to hit energy, financials, industrials and materials.
And Roger wants to show you two stocks that are a part of this stock market sector rotation strategy. These stocks are receiving a lot of attention from investment banks.
Check out the video below to learn more about these stocks and the big sector rotation taking place right now. And feel free to leave your thoughts in the comments section.
Also, don’t forget to subscribe to Roger’s YouTube channel if you haven’t already for up-date-date notifications as he posts his latest videos!
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