Growth-focused sectors often log outstanding returns when the economy weakens, because investors flock to companies that can expand their businesses in any environment. Industrials don't fit that bill since they're cyclical, meaning that they tend to boom and bust along with the economy.
"While we believe the sector will continue to chip away at its YTD underperformance, we also believe performance patterns will likely normalize, making outsized sector gains unlikely for the remainder of the year," Belski wrote. Instead, the firm said opportunities abound within industrials since the group has unusually wide gaps between both cheap and expensive stocks and those with and without earnings growth.
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