Potential Shift

Just a quick blurb. Techs, consumer discretionaries (TIF) and any stocks related to overseas growth (DE, CAT) have led us higher for most of last year. This still may be the case for months to come but there is a potential shift. These sectors have been leading for almost 2 years and their prices have certainly become dear.

Oil has the potential to really outperform and make its run. Every other asset class has either rebounded or lost ground (treasuries) from the 2009 March bottom. However, oil has lagged many of the other asset classes and certainly many of the hot commodities, such as gold, silver, cotton, coffee. The 5% advance from yesterday is just a precursor of things to come as it is still mired in a 5 month range and a larger range from July 2009 bottom. There was a time from the bottom when oil and equities were positively correlated once risk appetite began to come back into the market. But oil has certainly lagged even large cap equities 60% to 80% returns from 2009.

Other catalysts to watch for equities are earnings rather than growth. As said before, small cap techs and growth oriented tech companies have led the way but have come a long way from the bottom. Case in point, AAPL from 85 to 340. If we were to shift, it would be towards underperforming sectors, such as large cap companies with better than expected earnings. GE would fit in that category.