Houghton and Atkeson

3 Best Sectors for an Economic Recovery

    Tweet This

Free Trading Guides

We ranked almost all stocks in the market by relative strength. The relative strength we used was a comparative look at the price of each stock relative to all of the other stocks in the market. In layman's terms, we wanted to find stocks that market participants believe have the brightest prospects as measured by their price.

Well, before the market started to bounce in March, several groups of stocks started to advance. Overall, the Russell 2000 (RUT), which is comprised of smaller cap stocks, led the pack.

Smaller capitalization stocks leading during a recovery is typical, as smaller companies have the most leverage to small changes in business fundamentals, and are nimble and able to quickly position themselves to be in the path of the recovery.

3 Sectors Set to Benefit Most From an Economic Recovery

In determining which sectors will benefit most from an economic recovery, our bet is it will be the sectors that started to recover the soonest and are continuing to show leadership today.

On the group level, the three stock groups with the best overall relative strength dating back to the first week in February 2009, are consumer discretionary, consumer staples and energy.

And within these groups, the smaller capitalization companies are having the strongest runs.