Our framework for when investors should buy and sell different stock market exposures is clear.
- Buy Tech stocks when U.S. economic growth is accelerating.
- Buy Utilities stocks when U.S. economic growth is slowing.
This makes things very simple. Right now, the U.S. economy is accelerating. So buy Tech stocks.
“Now, I don’t know how many more times you’re going to have a chance to be long Tech, but I can’t say it any more clearly, be long growth,” Hedgeye CEO Keith McCullough said on The Macro Show earlier today.
The market agrees. Tech shares (XLK) are up +17.6% year-to-date versus Utilities (XLU) up just 6.9%. The S&P 500 is up 9.8% over that same period.
Digging still deeper under the hood, the performance of low yield stocks (versus high yield) and top sales/earnings growth stocks (versus slow growth stocks) also confirms our view that the U.S. economy is accelerating.
- LOW YIELD stocks were up +2.4% last week and are now +14.6% YTD (vs. High Yield = +0.3% YTD)
- TOP 25% SALES GROWTH stocks were up another +2.1% last week to +12.3% YTD (vs. Slow Growth at +1.6% YTD)
- TOP 25% EPS GROWTH stocks were up another +2.2% last week to +11.5% YTD (vs. Slow Growth at +1.5% YTD)
*Mean Performance of Top Quartile vs. Bottom Quartile for SP500 Companies
Stick with our call on Technology stocks here. The U.S. economy is accelerating.
