Much of the reason for the rotation is over optimism on trade talks, the primary driver of the stock market this year.Cyclical stocks are those tied to the economic cycle. When growth is increasing, cyclicals' profits and stock prices tend to rise, and vice versa. Classic cyclical sectors include semiconductors and most technology stocks, transports, REITs, energy, and materials. Some consumer-related sectors like automotive, gaming, and restaurants are also considered cyclical.
Coca-Cola is a classic low-volatility stock; it has a beta of 0.4, meaning that on a day when the S&P 500 might be up 1.0%, it would typically be up 0.4%. selects about 100 S&P 500 stocks with the lowest daily volatility over the past year, without regard to sector. It rebalances quarterly. It's heavily weighted in financials and utilities like Duke Energy, Eversource, and Exelon., is a bit different: it has more stocks , and applies constraints on how large the sectors can get. There is a much lower weighting to both Financials and Utilities, and includes Visa , Coca-Cola and Pepsi .
This "folk mythology" about growth and value is true to an extent, but the ways these are sliced and diced are more subtle and can result in surprises. selects stocks from the S&P 500 Index based on three factors: sales growth, earnings growth to price, and momentum. The largest holdings, not surprisingly, are the FANG names: Microsoft, Amazon, Facebook and Alphabet, but also includes fintech , as well as some consumer names .
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