Most investors are focused on a handful of sectors. Hence, following all stock market sectors is a success formula to outperform fellow investors, as it allows to identify the winning sector(s) in the broad array of markets.
The most known stock market sectors are the ones represented by the 9 sector ETF’s (XLE, XLF, XLI, XLB, XLP, XLU, XLU, XLYXRT). However, those sectors really represent the highest level stock market sectors; there are many more sectors on a ‘lower level’.By analyzing at a lower level, the probability of finding an outperforming sector increases exponentially.
We follow more than 50 sectors in the U.S. stock market, and we selected the most promising stock market sectors as 2017 kicks off. We use sector ETFs for this type of analysis; hence we feature one chart per sector.
As discussed before, the ongoing market sector rotation favors value stocks over growth stocks. Uncoincidentally, all attractive sectors we identified are part of the segment ‘value stocks’. Moreover, we believe the stock market outlook for 2017 is bullish, which is a key consideration before taking any position in stocks.
Note that our favorite stock market sectors are much more precise than the views you get on mainstream media outlets. For instance, Marketwatch came with a piece featuring the best stock market sectors in 2016, but, visibly, their view was too generic and seemed partly accurate.
The 5 best stock market sectors for 2017
The automobiles industry looks very attractive at this point. After a long consolidation period, it seems that this sector is breaking out from its 18 month downtrend (see purple circle on the first chart). If the automobiles sector, represented by DJUSAP, trades above 300 points for at least 3 weeks, we can expect investments in this sector to be profitable in 2017.
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