3 Best Sectors for an Economic Recovery
by Houghton and Atkeson 06/22/09
Free Trading Guides
Recovery Beneficiary #3: Energy
On the basis of relative strength, energy is strong.
Intuitively, this does not come as a surprise, as oil has just bounced from $30 per barrel to north of $70. What is a surprise is that the strength is concentrated in the geophysical and ethanol subsectors.
The three strongest stocks in the energy group from a relative price perspective are:
Of this group, OMNI looks the most interesting from a technical standpoint.
Hedging Your Bets
Every recession is different, and the timing and power of economic recovery is difficult to predict, so we want to offer you a hedge.
When the market has pulled back recently, healthcare stocks have outperformed.
The relative strength of the small-cap biotech stocks has been the fifth strongest group in the market since February. The pace of earnings growth in this group is somewhat detached from the broader economy, as it is based on drug discovery more than consumer demand. Additionally, many of these companies are acquisition targets by large pharmaceutical in both good times and bad.
In the event the economic recovery is less than expected, owning a group of small-cap biotech stocks could provide an important source of portfolio diversification.
Exchange-traded funds (ETFs) you may want to consider buying include:
Andrew Houghton and Nick Atkeson are the editors of Big Money Options. To learn more about them, read their bios here.
More By This Expert
Looking into June, the market should begin refocusing on upcoming earnings reports for evidence the economy is gaining momentum.
Watching the Treasury's Actions
In the short-term, the government's bond auction is likely to be a key driver of stocks.
Treasury Auction Boosts Market
The Treasury's auction of two-year notes brought an upside surprise which should alleviate fears of a lack of demand for U.S. paper.
Credit Markets Point to Upturn
The credit market, a reliable indicator of equity direction, suggests we will break out of the SPX's trading range to the upside.
The market seems to be saying that a 30% move up from the lows is ahead of the real economy and the market needs to allow the economy to catch up.
MOST POPULAR
- What's Hot: DELL, DHI November 20, 2009
- Sidewinder: MCD, DKS, JPM November 20, 2009
- Options News: SII November 20, 2009
- Sidewinder: CY, ADSK, KG November 19, 2009
- Options for Dummies November 19, 2009
Options Broker Center
