SlateStone strategists: U.S. stocks still have upside potential, but should shift towards defensive sectors
SlateStone Chief Equity Strategist Erin Gibbs advises investors to adopt a defensive positioning in the U.S. stock market, despite an overall bullish outlook. She believes that investors should shift from overvalued technology stocks to defensive sectors such as healthcare and telecommunications to cope with a potential market slowdown. Gibbs points out that the U.S. stock market is highly concentrated, especially with the "seven giants" accounting for one-third of the market, but she does not recommend completely exiting U.S. stocks; rather, she suggests tactical adjustments. She is optimistic about the upcoming earnings season, expecting strong performance from the S&P 500 index
According to the Zhitong Finance APP, Erin Gibbs, Chief Equity Strategist at SlateStone, suggests that while investors maintain an overall bullish stance, they should adopt a defensive positioning in the U.S. stock market. She believes that investors should withdraw from overvalued technology stocks and shift towards defensive sectors such as healthcare and telecommunications, which offer better value when the U.S. stock market's upward momentum may slow down.
Erin Gibbs stated, "This is exactly what we want to see to keep this bull market going." She referred to the market participation expanding from artificial intelligence-related companies to a broader range of sectors. The strategist also acknowledged that the concentration issue in the U.S. stock market is worth noting, especially concerning the so-called "seven giants"—Google (GOOGL.US), Amazon (AMZN.US), Apple (AAPL.US), Meta (META.US), Microsoft (MSFT.US), NVIDIA (NVDA.US), and Tesla (TSLA.US)—which currently account for about one-third of the entire market.
However, Erin Gibbs does not recommend completely exiting U.S. stocks but advocates for tactical adjustments. She pointed out, "I'm not saying you should sell all your U.S. stocks, but indeed, some of these companies—especially those with significant increases in capital expenditures, declining profitability, and shrinking margins—are worth being cautious about." She specifically mentioned Thermo Fisher Scientific (TMO.US) as a high-quality target in the healthcare sector expected to achieve sustained profit growth.
When asked about the upcoming inflation data and the Federal Reserve's potential interest rate cuts, Erin Gibbs stated that rate cuts would be "the icing on the cake," but not a necessary factor for maintaining market strength. She added, "I certainly hope to see long-term interest rates decline and mortgage rates drop—this would really help the other side of the economy."
Looking ahead to the earnings season, Erin Gibbs holds an optimistic view of the overall market performance. She expects the overall earnings performance of the S&P 500 index to be "quite impressive" and noted an unusual phenomenon—earnings expectations have been revised upward rather than downward before the earnings announcements. Finally, she stated that the productivity improvements brought by artificial intelligence will benefit more companies beyond the technology sector
