Most stocks investors are taught that stocks go up in price based on expected future earnings. In other words, stocks go up in price because investors expect that a company will sell more goods and services than it does today.
So, does the recent strength in utilities and consumer staples mean that Americans are becoming insomniacs (leaving the lights on all night) and on an unprecedented eating binge? Maybe someone’s been following me around, but otherwise, I doubt it. Instead, money seems to be shifting to those companies whose earnings are seen as more stable and constant during bad economic times.
So, if the economy is getting stronger, why aren’t investors getting in front of the trend, as they usually do, and buying companies who should benefit from an improving economy? That’s a question we’ll figure out in the weeks and months ahead.
This article was written by Laif Meidell, CMT, president of American Wealth Management, and portfolio manager of the AdvisorShares Meidell Tactical Advantage ETF (MATH)This commentary originally published in the Reno Gazette-Journal.