Although the S&P 500 appears overdue for a pullback of at least 5 to 10 percent, we remain bullish on select financial stocks and would regard any correction as an opportunity to accumulate our favorites.
Investor talk has turned against the Trump Trade, and for all the wrong reasons. While a market correction is due, look to the sectors that did well during the post-election period to perform well–making pullbacks an opportunity to buy.
Last week, the S&P 500 endured its worst one-day selloff since the immediate aftermath of Britain's surprise vote to exit the EU last summer. Although the S&P 500 gave up only 1.25 percent of its value yesterday, the decline felt more serious because the market has exhibited low volatility and traded within a tight range over the past 12 months.
Incoming data reinforce our take that the US economy has strengthened. But technical warning signs and policy concerns mean investors who invest in specific stocks and not the broader market have a better chance of outperforming.
A return to a more traditional US economic cycle would be good news for stocks as stronger growth and inflation drive pricing power, revenue growth and higher valuations. But watch these three signals to see if the economy backtracks.
Narrowing market leadership and deterioration in other technical indicators point to the growing risk of a bear-market correction in the first half of 2016. We also continue to monitor key US economic indicators for signs of further weakness.
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