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Banking giant Wells Fargo says a market rotation out of tech and consumer stocks is likely incoming, leading the lender to favor three other sectors.
In a new interview on CNBC Television, Wells Fargo head of global investment strategy Paul Christopher says the bank sees stock investors rotating to financials, industrials and utilities.
“What you’ve seen happening… is actually a rotation. It’s been a rotation away from technology and into some defensives, so some of those consumer stocks have made it to the top of the performance rankings over the last six to eight weeks.
Healthcare – we would be fading those consumer stocks and taking the healthcare back to market weight, and then using that money and rotating once more into the areas that we tend to favor. Again, utilities. We like those. We like industrials. We like financials right now.”
Christopher goes on to elaborate on why the banking giant prefers financials, noting that interest rates could soon be favorable for investors.
“If you’re looking for some diversification away from or a little bit not quite centered on technology, you could do financials because look, we think the interest rate on the short end of the maturity spectrum, the yield curve, we think those rates come down some more.
Meanwhile the rates on the longer end of the maturity spectrum, those tens 20s and 30s, we think those yields stay firm or even rise a little bit. That would favor banks because the bank is going to pay you the deposit rate. That’s the short term rate. That rate is falling. Their costs are falling.
At the same time, the longer term rates – that’s what they lend at that generates their revenue – those rates are steady to higher. So that’s one way to play or one way to think about financials, but another way to think about it. and again this touches a little bit on but it’s not entirely centered on technology – and that is that these technology companies increasingly are expanding via debt.”
