Go Ahead and Fret if You Like
Good news on both the US and European economy today points to Central Bank tightening. All signs point to a Fed that will be very slow and very incremental.
Although we think stocks will continue to work into 2016, there will most likely continue to be a bit of a head wind for fixed income, so one might want to shorten maturities a bit.
Our favorite stock sectors:
- Financials (higher rates mean more profitable loans)
- Big Cap Tech (good dividends, globally diversified, strong demand for products.)
- Biotech (the time is here for big breakthroughs after decades of major disease research, and industry consolidation should continue.)
Lower energy prices should continue to support the consumer and profit gains in the rest of the economy. The higher dollar creates a headwind for some exporters but we think an improving economy will mitigate that. As well, the higher dollar helps European and Japanese exporters so we think foreign stocks can continue their rally. China is a little scary for several reasons, so we’re not recommending big China exposure.
This summer will probably continue to be choppy while Greece gets sorted out one way or the other and our market continues to fret over Fed tightening. We suspect major market participants will be looking past all that before the summer is over. Take advantage of pullbacks.