At a gathering of elite financial advisors in June, attendees told Financial Advisor IQ they believe financial stocks are the sector most poised for a strong second half of 2017. That is according to a poll conducted at the Financial Times’s celebration of the 2017 FT 300 ranking of top RIA firms. The attendees chose between five options: consumer staples, financials, information technology, other and telecommunications. Of the 51 advisors who participated, 35% cast votes for the winner.
The results were shared with attendees by Brian Levitt, senior strategist at OppenheimerFunds. Levitt told the honorees that he considers the financials sector undervalued.
Information technology was the second most popular choice with 27% of the vote, followed by consumer staples with 12% of the vote. Finally, telecommunications received 6% of the vote and 20% of attendees voted for “other.”
“In 2017, on the way to all-time highs in the markets, the composition and leadership of returns changed significantly,” he said. Looking forward to the second half of 2017, Levitt believes the focus will shift to true growth companies.
Oliver Pursche, CEO of Bruderman Brothers, attended the event. He said the top three sectors from his team’s perspective are consumer staples, telecom, and utilities. Pursche praised companies in those sectors for their “strong balance sheets, solid businesses, and very attractive dividends with a great history of raising dividends.”
“I’m surprised at the results where attendees are hot on financials,” he said. “Financials have some issues ahead of them.” Pursche added that he doesn't foresee a deluge of new regulations coming into play.
Meanwhile, the market’s run-up is undeniable. With 8.5 years of solid gains in the rearview mirror since the market’s bottoming out, anyone would be remiss if they didn’t begin to ask just how high is up. However, Levitt doesn’t see any indicators of trouble on the horizon. He told attendees, “This bull market going to go on far longer than any of us imagined,” and reminded them that “bull markets don’t die of old age.”
“What worries me is the Fed wants to raise rates, when if not now,” he said. “They could flatten the yield curve – and if they do, we could get a correction.”
Another attendee at the event, Michael Brown, a partner and managing director of Dynasty Wealth Management, agrees with most of the poll results. He also admits that he doesn’t have one particular sector he’s feeling “jazzed” about at the moment.
Instead, he sees a lot of strength in technology companies alongside a tradeoff between consumer stocks and healthcare stocks. “Healthcare stocks look better now, specifically biotechs, which are doing remarkably well,” he said in an interview with FA-IQ.
Brown also believes there will be more acquisitions in the tech space going forward. “Companies are already redeploying capital by paying extra dividends and doing buybacks, so they are looking for ways to buy other verticals in the tech space,” he says.
And while it makes sense that some investors worry about what the future holds, Levitt shared a bounty of optimism in addition to the sectors with the most strength for the foreseeable future. Noting that 3.5 billion people are slated to enter the labor force in emerging markets and around the world, he added, “the world has never been a better place to be alive. We’ve never been healthier or wealthier.”
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