“Be wary of sectors with extreme positioning. This is why we prefer to slowly swap some crowded income plays and expensive high-quality stocks for cheaper cyclicals at this time,” it added. [Dividend ETFs: The ‘Bondification’ of the Stock Market]
The U.S. is entering a new, “stronger growth phase” as improving finances jumpstart borrowing, Carson said in the Bloomberg article. Credit will drive consumer spending, generating business investment and jobs to extend the expansion well beyond a fifth year, he added.
U.S. consumption makes up over two-thirds of the economy.
Financial stocks “will continue to outperform as they’re right at the heart of the credit-creation process, which is becoming noticeable,” added James Paulsen, chief investment strategist at Wells Capital Management, in the report.
While consumer cyclicals have less room to build on their big gains, if unemployment falls close to 6%, “all of a sudden you’d see a lot more demand for credit” and spending, he said.