Financials Are Done

I believe the outperformance in the financial sector is done. Portfolio managers are already heavily overweight the group and thus far earnings have been less than inspiring. Earnings does not give portfolio managers a reason to add to their already overweight position. That means the group is likely to underperform. Technology has been mixed giving investors little reason to add to their overweight position as well.

Investors are underweight defensive sectors like staples, healthcare and utilities. I expect those groups to make up some lost ground. They are also trading at much lower valuations and paying respectable dividends.

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