NEW YORK (Reuters) - As the bull market gets a new lease on life, Wall Street is growing less fretful of a U.S. growth slowdown and betting on shares of companies in sectors that will benefit from the economic up-cycle, such as industrials and financials.
After tumbling nearly 20% from its peak at the end of 2018, the S&P 500 has rebounded strongly this year as U.S. economic data remain robust and the Federal Reserve has indicated a pause in interest-rate hikes. Last week’s U.S. gross domestic product reading, which put first-quarter growth at a 3.2% annualized rate, further bolstered economic sentiment.
Accordingly, fears of a stock market meltdown have given way to talk of a possible melt-up. The S&P 500 has notched record highs in the past three trading sessions.
As a result, shares of companies in cyclical sectors and industries - those whose fortunes ebb and flow in tandem with the economy - have grown more attractive. Indeed, industrials and consumer discretionary stocks have outperformed the S&P 500 this year.
Industrials are well placed to continue their ascent, especially if the United States and China reach a trade agreement as anticipated, said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York. Last year’s trade tensions greatly contributed to the economic worries at the end of last year, he said.
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