The question now for portfolio managers like myself is, “does one good employment report turn the tide?”
Since I already mentioned that I all but dismissed the poor Q1 GDP number and I am not giving much weight to the weak March employment, I do believe that Friday’s report is the start of the next upward swing in our frustrating but positive post financial crisis recovery. With that, the intermediate-term outlook for stocks has brightened for many although unchanged from my already bullish vantage point. The three or six month trading range in the S&P 500, depending how you view it, should be resolved to the upside, whether that’s convincingly this quarter or next. Sometimes, in order to end a trading range, markets move violently from one side to the other, often breaching key levels and forcing traders to take action, only to immediately reverse course in a sustained move in the other direction.
Regardless of how the current trading range resolves itself, I anticipate sector leadership coming from some familiar names as well as two fallen angels. Semiconductors, long a canary in the coal mine for the tech sector, are poised to resume their rally. Consumer discretionary, left for dead countless times during the bull’s six plus year reign, continues to confound the bears and lead.
Paul Schatz is President and Chief Investment Officer of Heritage Capital, LLC, in Woodbridge, CT. and a Managing Partner at Numetrix Capital, an investment research firm focused on multi-manager, multi-strategy portfolio solutions.
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