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Investment Strategy

Tactical Repositioning

By Elliott H. Gue, on Apr. 17, 2014

In the July 6, 2013, issue of Capitalist Times Premium, we argued that the US economic growth had started to accelerate from the lackluster pace that prevailed through much of 2011 and 2012. (See America’s Industrial Revolution.)

With the headwinds of tax hikes and spending cuts likely to fade into early 2014, we outlined our case for a Great Rotation out of consumer staples and other defensive groups and into cyclical sectors such as industrials, basic materials and information technology.

We also expected the strengthening US economy to support additional upside for US equities in early 2014.

Keys to Outperformance

Investors can outperform the market by picking the right sectors or picking the right stocks. Being right on both accounts often delivers the best returns.

For the most part, we scored a double bull’s eye in the first quarter.

Since we outlined our case for the Great Rotation last summer, the S&P 500’s industrials and information technology sectors have outperformed their parent index.

Meanwhile, consumer-staples stocks have lagged the S&P 500 since July 6, 2013.

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