During our Strategy Workshop (Oct. 12) we laid out rationale supporting any Equity Market Bounce thi...
2 Sectors to Watch Through 2011
04/15/2011 10:35 am EST
Energy and technology should perform well as a sector throughout the year, but there are many pitfalls to navigate. Elliott Gue of Personal Finance shares his recommendations in this exclusive interview with MoneyShow.com.
Elliott, where are we in this stage of recovery here?
Well, in the United States, I think we’re really in an acceleration phase.
Last summer we saw a real slowdown, a sort of soft patch for the US economy, but now we’ve actually seen an acceleration toward the end of 2010 and into early 2011. I think that we’ll probably see growth as high as 4% this year in the United States. That’s very, very strong.
You know, the GDP number we got the fourth quarter was actually negatively affected by inventories, but if you net that out, it was one of the strongest numbers we’ve seen in the past decade. So, I think we’re actually in a sort of acceleration phase for the US economy and that can probably continue at least through this year.
Are there any sectors in stocks that will perform well in this stage?
Well, I think your more cyclical groups are where you want to start with. Look at companies in the energy space, for example. Of course, we’re seeing very high oil prices. Stay kind of away from the natural gas side of the equation. Gas prices look pretty depressed.
Is it because of the supply that we’re finding here in the States?
It’s totally supply driven. Demand for natural gas is actually quite strong, particularly in the petrochemicals industry, and some of the industrial demand for gas has really picked up, but there’s just an ocean of natural gas.
We produce almost as much natural gas in the United States as the entire Middle East and Africa combined, which is a pretty amazing thing to say.
Is that an export opportunity?
Well, it could be down the road. The problem is, really, where are we going to export it?
We don’t have the gas-liquefaction capacity to actually export natural gas. There is some resistance to building that type of thing, it’s very expensive, and right now actually the global LNG market is also quite oversupplied.
We’ve also seen a lot of new projects come on in places like Qatar, so natural-gas prices, I think, are going to be pretty pressured, at least for the first half of this year.
Maybe toward the back half, if we see a slowdown in drilling activity because gas prices are so low, we could see that situation normalize. But right now the supply is a real problem for the natural-gas market.
Any other sectors, other than the cyclicals, that should do well?
Well, I think technology is another area that could see a lot of growth this year.
One of the real bright spots in recent quarters has been business spending. Business really cut spending to the bone during the downturn, and really they’re kind of behind the curve in terms of tech spending, upgrading their networks, upgrading their PCs.
And they’re sitting on tons of cash.
And they’re sitting on tons of cash, and you can borrow pretty much anything you want. And a lot of companies even with B credit ratings or junk credit ratings, they’re able to borrow at very, very attractive rates.
So, I think you’re seeing a big pick-up in business spending, and I think that can continue to be a bright spot throughout 2011.
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