Make Way for the Market's New Leaders in 2013

Focus: ETFs

Howard Gold Image Howard Gold Founder & President, GoldenEgg Investing

A strong start in the stock market in 2013 has cheered investors weary of the fiscal cliff doom and gloom during the holidays, and MoneyShow’s Howard R. Gold, also of The Independent Agenda, examines the sectors that will lead the next leg up.

Stocks have moved up smartly since the New Year’s Eve rally began, and though they’ve paused a bit over the last couple of days, they appear to be heading higher still.

Last year’s leaders—especially consumer discretionary and financial stocks—are still setting the pace, suggesting that the economy will continue to grow in 2013, as housing recovers and auto sales stay strong.

But as the year progresses, I expect those early-cycle plays to pass the leadership torch to stocks that do best later in an economic recovery. We may even be coming to the end of the massive rally in homebuilders and similar stocks that has produced such phenomenal gains since the market bottom of early 2009.

Sam Stovall, who follows sectors—and market history-—closely in his role as chief equity strategist at Standard & Poor’s Capital IQ, thinks a change in leadership may be in the works, most likely later in 2013.

“We are starting to move from the early cycle to the mid-cycle performers,” he told me. That means sectors like industrials and materials stocks could be the leaders of the bull market’s next phase.

Right now he thinks last year’s leaders—the S&P financials (up 28.8% in 2012) and consumer discretionary (up 23.9%) sectors—will remain leaders through spring.