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MM’s pick for sector rotation over the next 6 months

Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.

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Question asked

MM’s pick for sector rotation over the next 6 months

Hi Was curious to understand with changing macro economics, what sectors does MM feel is going to see money exit and which sectors or investment arrangements see the money come in?

Answer

Hi Nilang,

The likely key to this question is bond yields, if we are correct and we see bonds rally/yields fall through 2024 then sector rotation is likely to be prevalent but until we see such a move it will be business as usual. Assuming we are correct and bonds eventually follow our roadmap we will be considering the following:

  • Banks will miss the tailwind of rising interest rates whereas real estate should enjoy any reprieve from yield pressures.
  • Consumer Discretionary stocks should benefit from lower bond yields.
  • We believe gold will outperform energy stocks if/when yields finally reverse lower, or just stop rising!
  • Healthcare should enjoy some sector catch up on the high flying tech names.

NB The last 2 sectors would usually both benefit from falling yields but this hasn’t been the case over the last 12 months.

However we note at this stage there are still no signs of bonds reversing even as uncertainties escalate in the Middle East.

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ASX200 Tech v Real Estate Sectors
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