Tags: Ingram | stocks | growth | economy

BGC's Mike Ingram: There's a 'Rotten' Rotation Going on in Stocks

By    |   Thursday, 10 July 2014 01:14 PM

The stock market's latest bout of record highs has hidden a "rotten" rotation in which defensive stocks are outperforming the kinds of growth and cyclical stocks that signal a healthy economy, according to Mike Ingram, market strategist at London-based BGC Brokers.

That suggests investors are not really buying into the economic recovery drumbeat coming from market bulls, he explained.

"It is notable that some of the best-performing sectors in equity markets this year are highly defensive — utilities and healthcare — while more economically sensitive sectors such as industrials and banks have struggled," Ingram said in a new client note obtained by MarketWatch. "In this regard at least, markets have yet to reflect the recovery that economists have been forecasting."

Editor’s Note:
Retire 10 Years Earlier With These 4 Stocks


Ingram believes value stocks are still struggling to outperform growth stocks, which is telling "because one would normally expect 'value' to re-rate as economic growth broadens out and the premium that investors are willing to pay for growth stocks falls."

He also believes the bond market is flashing yellow caution lights, according to MarketWatch.

The correct interpretation of the fact that long-term bonds continue to rally while the Federal Reserve maintains an easy money stance is that "long-term growth is impaired," Ingram argued.

Second-quarter earnings results, which are just starting to be released this week, may be key in determining where the economy is headed next.

"I cannot help but feel that this market is living on borrowed time. The rotation we have seen thus far looks rotten. It might easily presage ever-decreasing circles," he wrote.

Billionaire investor Wilbur Ross said his private-equity firm, which specializes in acquiring distressed companies, has sold six times more assets than it has bought so far in 2014.

Ross told CNBC that with stock valuations in the U.S. having risen so much, and "with markets [near] at all-time highs, it shouldn't be surprising that there are more things that are attractive to sell than to buy."

Editor’s Note: Retire 10 Years Earlier With These 4 Stocks

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The stock market's latest bout of record highs has hidden a "rotten" rotation in which defensive stocks are outperforming the kinds of growth and cyclical stocks that signal a healthy economy, according to Mike Ingram, market strategist at London-based BGC Brokers.
Ingram, stocks, growth, economy
341
2014-14-10
Thursday, 10 July 2014 01:14 PM
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