We believe that we will get an upward move in the cyclical sectors some time in the near future, but think that we're still several weeks away from such a potential move.
-Brad Sorensen, director of market and sector analysis, Charles Schwab
We remain slightly defensive with our sector recommendations but admit that we're a bit concerned over doing so. While we certainly believe this is the appropriate positioning given the continued elevated uncertainty in the market, combined with sluggish economic data, we also acknowledge that some defensive areas appear extended and the possibility of a near-term cyclically-based rally exists.
In fact, we believe that we will get an upward move in the cyclical sectors some time in the near future, but think that we're still several weeks away from such a potential move. With Congress on vacation, and many European policymakers on holiday, earnings season complete, and the "dog days" of summer fully entrenched, finding a catalyst for a substantial move one way or the other may be more difficult over the next several weeks. But investors still seem to be leaning toward the defensive areas of the market, despite the decent run they've had recently, and we are sticking with our current slightly defensive stance.