The bad news may be just beginning for our favorite sector short.
Hedgeye Industrials analyst Jay Van Sciver highlights some of the reasons why we believe Industrials (XLI) is an attractive sector to be short heading into 2H18.
Some of the reasons include:
- Moderating growth
- Higher input costs
- Expectations are out of line for the sector
Additional headwinds include slowing Chinese demand, a strengthening dollar, and lower than expected capex investment from the recent tax bill.
That’s a lot of negatives for a sector already down around 4-5% this year.
“It wouldn’t have been rational to expect a big uptick in capex from tax reform, but that’s what was embedded in a lot of the valuations we saw,” Van Sciver says in the clip above.
Watch the above clip for more.
