For the last year, SYM has emphasized the large cap value sector within managed client portfolios. This gave clients an overweighting to dividend-oriented companies in defensive sectors like healthcare, consumer staples, utilities and telecom. It also meant less exposure to materials, industrials, energy, and technology stocks.
As the positive market momentum continues, many investors wonder if 2013 will be a repeat of 2011 and 2012 when we experienced a summer swoon in domestic equity markets with the defensive sectors holding up better than the broader markets. Or, will the current market environment and prospects move investors back to more economically sensitive stocks?
While headwinds remain, we do not believe 2013 will be a repeat of the last two years. We do, however, expect market leadership to rotate to more economically-sensitive and appreciation-oriented market sectors.
Despite the fact that economic growth is slow, there are a number of data points that continue to make us optimistic. A continued resurgence of housing, the amazing developments in U.S. energy production, and the persistence and strength of corporate earnings, have reinforced our conviction that the U.S. is in a slow-growth recovery mode that can lead to higher stock prices over the next few years.
This week, SYM has initiated trades to reduce our portfolios’ exposure to domestic large cap value stocks. We will utilize the proceeds from these trades to acquire additional large and small capitalization, domestic growth stocks. This action is being taken so we may fully participate in what we consider to be a sustainable bull market.
We believe the stock market will enjoy a good 2013 and we are likely to see leadership revert to those sectors that more typically excel in such market environments. Defensive names should slide from their favored status as investors seek to invest in well-priced, quality companies offering better appreciation potential.
Please don’t hesitate to contact your advisory team if you have any questions.