The chief investment officer at Morgan Stanley believes that new investment opportunities are emerging amid the S&P 500 pullback.
In Morgan Stanley’s Thoughts on the Market podcast, Mike Wilson says that the stock market’s recent pattern of sector rotation will likely continue in the coming months and predicts new categories will start to outperform.
“Take note of these corrections in momentum, because they often bring change in leadership, and that’s the real opportunity.
We’ve already seen a few leadership rotations this year, from precious and base metals to rare earths to energy and, finally, to semiconductors. Now I think the market may be ready to broaden again, much like it did late last year and the first six weeks of this year.”
The analyst says that three new sectors are showing all the characteristics that tend to lead to future rallies, setting them up to post greater gains than other groups.
Importantly, our preferred sectors of consumer discretionary goods, transports and regional banks are all up more than 10% over the past month, while the S&P 500 was down modestly.
Yet sentiment towards these areas is still muted. That’s exactly the kind of set up I like: improving fundamentals, better relative price action and investors still skeptical.”
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