Retail investors with less experience may be struggling to adjust because they’re familiar with the prominent technology companies. However the market often passes through multiyear cycles. Understanding changes in investor sentiment can help traders avoid areas of weakness and focus on new opportunities.
The SPDR Industrial ETF (XLI) set a new all-time closing high on Friday, while the SPDR Technology ETF (XLK) slid for a third straight week. The divergence follows a new trend of investors shifting toward value stocks that can withstand higher interest rates. They’re also looking for companies that can benefit from faster gross domestic product.
First, the change can be explained by higher interest rates and higher commodity prices. This is stoking demand for “cyclical” companies like industrials and financials that benefit from more gross domestic product. Many of these companies struggled before the crisis and are now being rediscovered for the first time in years.
This post will help traders keep up with shifts in sentiment. It will describe some basic techniques for discovering new areas of leadership at almost any time. These can also help you avoid falling into value traps, or being late to stocks that are losing buyers.
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