It’s no secret: I expect the stock market to rally in the second half of the year.
In fact, I have said the S&P 500 could rally double-digits from here.
Well, today, I want to let you know which sector is the one you want to own.
This is important because we’re not going to see a straight shot higher — this is going to be a volatile second half of the year.
But amidst this volatility there’s one sector that will stand out amongst the others.
It has been unloved since the start of the year. It sold off along with the rest of the stock market during the latest correction, but it is the one sector that has failed to bounce back at all.
That’s about to change. Here’s why…
A Steady Group of Stocks
The consumer staples sector isn’t one we generally think of as being unloved. It’s typically a steady group of stocks that go back as much as a century in their respective fields.
These stocks also tend to follow the market, at the very least.
But since the latest stock market correction, it’s a sector that has failed to recover, and is actually down more than it was during the correction.
That represents an opportunity when you understand one simple concept about the major sectors of the market — there is always a rotation.
It’s a concept I have talked about before, and have been studying for years now.
Over and over again, one thing is certain: Stocks rotate around the S&P 500 Index in a predictable fashion.
The Relative Rotation Graph™
The graphical representation is in the Relative Rotation Graph™ (RRG) concept. I’ll keep it brief today, but if you want to read more, click here.
Basically, it looks at the relative performance of a stock or sector compared to the S&P 500, and adds a momentum indicator to that. This shows that stocks or sectors rotate in a predictable fashion of moving from lagging the S&P 500, to improving, then leading, and eventually weakening again to fall back to lagging — and then do it all over again.
This is the rotation that occurs in the stock market.
Consumer Staples Sector
And right now, the consumer staples sector has drifted a significant distance from the center, which represents the S&P 500. Take a look:
We can confirm this lagging segment for the sector by looking at a price chart of the sector itself. You’ll see it hasn’t participated in the rally the broader stock market has in the past couple of weeks.