Sector strategist Denise Chisholm doesn’t believe the recent uptrend in the market is due to investors’ reaction to U.S. fiscal stimulus, because that had been expected and, therefore, already priced in. She believes it is more likely that investors have been surprised by the decline in COVID-19 cases in the U.S. Denise considers small caps, financials, tech, consumer discretionary and energy service companies as the best risk/reward sectors. Financials showed the cheapest valuations at the end of 2020. Energy and health care stocks were also inexpensive, based on price-to-earnings and price-to-book ratios. Historically, extreme market volatility tends to be followed by above-average stock market returns. She believes that small-cap stocks may be primed for outperformance; in the past, when those factors lined up, the odds of outperformance increased. Denise will be a regular guest, so please subscribe to not miss an episode.
Recorded on February 9, 2021.