Fund strategist Mark Newton says falling crude oil prices are adding strength to several sectors that have lagged the broader stock market.
In a new interview On the Fundstrat YouTube channel, Newton says the recent improvement in some consumer and transportation stocks has coincided with crude oil weakness, creating opportunities outside of technology.
“A lot of that is based on algorithms and the crude is being rejected. We are seeing greater strength in the airlines, who are the biggest beneficiary of a decline in crude. [oil].”
The strategist also says several retail stocks that struggled as the broader market pushed for record highs are starting to stabilize and join the rally.
Newton points to companies like retail giants Nike, Target, Best Buy and Home Depot, noting that they have largely failed to keep pace with the market over the past year, even as major indexes hit new record highs.
“Markets hit new all-time highs, but these stocks just weren’t participating. So now that’s slowly but surely starting to change.”
Newton says the recent strength has emerged over the past week and a half and does not appear to be primarily driven by company-specific fundamentals.
The strategist adds that investors looking to diversify beyond technology may want to pay attention to these areas as semiconductor and technology stocks continue to gain momentum.
“That is a very good sign for people who are looking for alternatives to commodity [to] put down [their] Micron and Seagate [stocks]…tech stocks potentially become a bit overbought if you want to diversify.”
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