On Tuesday morning, we got back on the offensive via a tactical call into Value, Banks, and Tanks (Industrials). We had been waiting for signs of a turn in the economically sensitive sectors coupled with even further improvement in credit as seen through corporate spreads and the Chicago Fed National Financial Conditions Subindices to become more offensive. We believe those began taking place immediately after the 60 Minutes TV interview with the Fed Chair Powell and became crystal clear at the end of last week, which allowed us to recommend these economically sensitive sectors that appear to have successfully retested the low in mid-May. The combination of (1) an incredibly aggressive Fed and (2) strong breadth of recovery as we moved out of the “frustration phase” last week suggests it is not too late to get on the bull, especially if we see a period of consolidation.
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