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The last few weeks have challenged a key contention of the unbridled bulls — namely that the global economy is firing on all cylinders. Just consider:
* Euro-zone unemployment rose to 12 percent in February, the highest since tracking began in 1995! Manufacturing activity shrank yet again, with a key index falling to 46.8 in March from 47.9 a month earlier.
* The benchmark U.S. ISM index slumped to 51.3 in March from 54.2 a month earlier. That was the biggest monthly drop in that manufacturing gauge since July 2011. ADP’s payrolls report showed only 158,000 jobs were created in March, the lowest since October.
* Housing demand, as measured by pending used home sales, new home sales, and builder sentiment, also appears to be leveling off after a 2012 rise.
That’s why many stocks in economically sensitive sectors like transportation, technology, materials, and more recently, financials, have started lagging badly. It’s also why the Russell 2000 Index of smaller capitalization stocks and the Dow Jones Transportation Average have stumbled.
Is this a problem?
Only if you own the wrong kinds of stocks! Because many of the ones I’ve been highlighting are continuing to power higher, setting multi-year and (in some cases) all-time highs!
Consumer staples, health care, other non-cyclicals rallying bigtime!
Several times in Money and Markets, my Safe Money Report, and elsewhere, I’ve highlighted the attractiveness of “bond alternatives.” These include individual stocks, ETFs, and funds that feature better yields, less risk, high quality ratings, or other factors that make them much more attractive than lousy government or junk bonds.
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| Great opportunities can be found in the health care sector. |
To cite just one example: I saw investors dumping utilities shares like hotcakes back in late 2012. But rather than join the herd, I told my Safe Money subscribers to snap up these bargain-basement, higher-yielding companies in the form of the Utilities Select Sector SPDR Fund (XLU).
Since then, the ETF has exploded upward, hitting a 57-month high earlier this week. I’m tracking a gain of more than 12 percent in just a few months. Another “bond alternative” ETF in the Master Limited Partnership (MLP) space has performed even better — generating total returns of up to 17.2 percent!
I’ve also been recommending several plays in the consumer staples sector, which are setting multi-year and all-time highs across the board. And now I’m seeing some nice breakouts and opportunities in the health care arena — including one higher-yielding, international pharmaceutical firm I just can’t help but add here.
What to Expect Going Forward
Naturally, not all recommendations are winners. Losses can and do happen, and no one can predict the future with absolute certainty.
But I believe these kinds of profits go to show that you can find opportunities in select sectors — even in an environment of slow global growth, central bank recklessness, and bond market turmoil. It’s all about picking and choosing your spots, while maintaining some downside hedges and taking profits off the table when appropriate.
If you want more specifics, including the details on all these recommendations and more, you can click here
to learn more about my Safe Money Report. Or give my customer service staff a call at 1-800-291-8545 to see how you can get on board at a cost of just 12 cents per day!
As for my outlook going forward, I would not be surprised in the least to see some of these high-flying stocks take a breather. The market overall may also stumble if we get more evidence the economy is downshifting. That’s why I’ve largely been avoiding sectors like those I mentioned at the outset, which look the most vulnerable to me.
But give up entirely on finding safer, specific profit opportunities? I sure wouldn’t, at least not yet!
Until next time,
Mike
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
