Mark Newton, a strategist at Fundstrat, says lower crude oil prices are helping to build strength in several sectors that have lagged the broader stock market.
In new interview On the Fundstrat YouTube channel, Newton says the recent improvement in a number of consumer and transportation stocks has coincided with weakness in crude oil, creating opportunities outside of technology.
“A lot of it is just an algorithm based rejection of crude oil. We are seeing better strength from the airlines, which are the biggest beneficiaries of the decline in crude oil.”
The strategist also says that many retail stocks that struggled while the broader market surged to record highs are beginning to stabilize and participate in the rally.
Newton points to companies like retail giants Nike, Target, Best Buy and Home Depot, noting that they have largely failed to keep up with the market over the past year despite major indexes reaching all-time highs.
“The markets were at all-time highs, and these stocks weren’t participating. Now that’s slowly but surely starting to change.”
Newton says the recent strength has been evident over the past week and a half or so and does not appear to be driven primarily by company-specific fundamentals.
The strategist adds that investors looking to diversify away from technology may want to pay attention to these areas as semiconductor and technology stocks expand further.
“That’s a very good sign for people who are looking for alternatives to where to put (their) Micron and Seagate stocks…Technology stocks will probably become a little overbought if you want to diversify.”
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