Published: November 25, 2018 | Blog Post
The stock market has been volatile for most of the year. 2018 has been defined by market volatility and the sectors are going through a realignment. As BTC Trading Inc. clients approach their yearend portfolio reviews, they can expect some realignment in their U.S. holdings. The three sectors favored in our Seoul office to hold steady going into ongoing choppy markets are technology, materials and consumer discretionary stocks. Yearend earnings are expected to be strong across the board and the bull market has every reason to continue. Within the broader market, it’s normal and healthy for sectors to have cyclical rotations. Telecoms and consumer staples stocks are showing relative weakness.
Technology stocks are by and large expensive. But they represent future growth and investors are willing to pay a premium. They have the benefit of a longer time horizon and business cycle. Short term they are showing good relative strength.
Materials sector stocks are trading near the low end of their traditional 10-year cycle and present better value. Industries in this sector include mining, metals, forestry, chemicals and packaging. This sector is vulnerable to economic cycles since companies’ revenue is dependent on demand for goods and services by people and other companies. If the economy is expanding and money is being spent, this sector does well. In recessions the opposite holds true.
The consumer discretionary sector sells non-essential goods and services and is also sensitive to the overall economy. This includes the automotive industry, hotels and entertainment, restaurants, household durable goods and clothing. Unemployment rates are at historic lows in the United States and heading into the annual shopping season these stocks should continue to hold their own.
South Korea chemical and steel companies held their own during recent sell offs on the Seoul KOSPI. However the bellwether Samsung Electronics has taken a beating recently and pulled the overall market down.
BTC Trading takes a long term view and builds individual client portfolios to weather financial storms. Whether the market is up, down or sideways the best long term returns are with good quality stocks. Market volatility can be unnerving and can be remedied in most cases by regular communication with your advisor and a good bottle of scotch.