Given the past few days that have seen a retreat from the momentum stocks and cloud companies, is the tech/cloud trade becoming overcrowded? ETF Trends CEO Tom Lydon and Andres Garcia-Amaya, CEO of Zoe Financial, joined host Tyler Mathisen on CNBC’s “Power Lunch” on Tuesday to discuss this matter.
In speaking on possible overcrowding, Lydon does not believe this is a real issue. Given the hefty amount of flows, there’s so much money moving into new economy stocks, and that’s a good thing for outlying sectors.
“It used to be, in the last 1- years, you’d just buy the S&P 500, as it was really tough to beat it, because, collectively, all sectors did well,” Lydon states. “However, now we’ve got a whole group of sectors that are doing really poorly, like banks, energy, travel & leisure, and transportation.”
On the other hand, looking at communication services and information technology, those companies are doing great. Part of that is due to their growth phase being sped up due to more people changing the ways they do business. People are working from home, embracing technology in ways they never have before, and it’s essential in order to operate their businesses and have them be profitable.
In addition to this, when asked about bank ETFs, Lydon also noted how there have been great opportunities in that realm. That said, he reminded viewers that all banks are not equal — big banks have some buoyancy in the fact that they have other businesses outside of lending.
There’s a regional ETF, SPDR S&P Regional Banking ETF (KRE), which is more exposed to loans. Were people to feel this current recession is going to be the shift, there’s a more significant opportunity there. However, the tail-end of this is likely going to be longer. It’s going to be a marathon and not a split.
“If I had to choose,” Lydon begins, “I probably wouldn’t necessarily going into financial services and banks right now. I’d stick with information technology. I’d stick with actively managed ETFs in that space. In particular, the ARK Innovation ETF (ARKK) has some innovative financial companies held, that are really doing well in this environment.”
Watch Tom Lydon Talk Earnings Potential On Power Lunch:
For more market trends, visit ETF Trends.