Kristina Hooper, Chief Global Market Strategist at Invesco, joins TheStreet to explain which sectors might be safest for your investments.
Transcript:
Conway Gittens: So what are the sectors that you like when you think about this rotation that’s happening? Where do you want to be?
Kristina Hooper: So I think the cyclical parts of the economy, cyclical parts of the stock market, I should say, look attractive. And that’s because they’re the most economically sensitive. And so if we do see a resurgence in growth this year, which is my base case, I think what we’re getting in terms of improvement in real wage growth, what we’re likely to get in terms of a supportive monetary policy environment, doesn’t mean that we have to see a lot of easing, but we’re going to see certainly global easing. And then add to that deregulation. And I think that all leads to most likely a resurgence in growth this year. And that should benefit smaller caps.
It should benefit cyclicals. So the materials the industrials even consumer discretionary. Now having said that, while that’s my base case, I think there is that very significant risk that we could see a growth slowdown if we see too much in the way of federal cuts, not just jobs, but just federal spending, that can create a pretty significant headwind. Now, what we heard from Jay Powell in the FOMC press conference last month was that job growth has slowed. That’s OK because we haven’t seen much in the way of layoffs. But if we were to see an increase in layoffs, that would have a significant impact on unemployment.
Conway Gittens: So the stock market is always forward-looking. It’s just trying to predict things before they happen. So I’m wondering when it comes to the – I know you mentioned the impact might likely be small or contained in terms of the tariffs. When you look at the investment landscape, are there places that you think will be more immune or isolated from the tariff threats?
Kristina Hooper: Sure well, I think financials is an obvious answer. That’s a sector that not only is likely to be very well insulated from tariffs, but it’s also one that is likely the greatest beneficiary from deregulation. So I would put that out there to a certain extent. It could very well be tech as well as one that’s likely to be insulated from tariffs. But I do have to give a caveat.
A lot of this is really dependent on an investor’s time horizon. If you’re very tactical, I think this matters. But if you’re not tactical, if you have a longer time horizon, I think it’s more important to have exposure to the cyclicals. Make sure that you have exposure to lower valuation parts of the stock market, where many investors are probably underexposed after having such a significant run up in the high valuation names over the course of several years.
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