3 Big-Money Sectors You Need to Trade Right Now

If you want to book consistent gains trading stocks, you have to know where the money is flowing.

Right now, if your cash is tied up in consumer staples and industrial names, you’re doing it all wrong. These aren’t the stocks that are outperforming the S&P 500. You’d be better off buying an index fund and spending the rest of your summer trying to get rid of your farmer’s tan at the beach…

But if you want to put an end to your puny returns, you have to ride the market’s strongest sectors. Stocks in motion tend to stay in motion. And the in-favor sectors will probably continue to lead the market…

It’s stock market physics in action!

Today, I’m going to dissect the S&P to show you the three best performing sectors of 2014—and how to play them for outsized returns.

Sector Performance vs. S&P 500

First up is healthcare, the third-best performing sector during the first half of the year. Back when biotech shares were melting down a few months ago, I told you healthcare stocks could be a safe “hideout” for your trading dollars. Well, the sector hasn’t disappointed…

The Health Care Select Sector SPDR ETF (NYSE:XLV) has gained more than 13% year-to-date. In fact, the health care sector posted more than half of its year-to-date gains in just the past two months. If you’re looking for some fundamental catalysts, the Affordable Care Act and an aging population both remain big themes in the long-term…

While XLV is trading near the top of its range right now, it remains a “buy-the-dips” opportunity during the second half of 2014.

Next up is the utilities sector.

Back when traders began pushing momentum stocks down the stairs earlier this year, investors fled to anything paying a dividend. That’s right– the boring, dividend-paying names everyone ignored while the market was ripping higher were bouncing like growth stocks. High-yielding utilities were among the big winners. And even as momentum stocks recovered in June, utility shares continued to post new highs.

The Utilities Select Sector SPDR (NYSE:XLU) is your best bet at playing this sector. These stocks have sharply fallen from their highs this month. But if XLU can bounce higher near $42, the uptrend will remain intact.

Finally, we come to the year’s best performing sector: Energy. The Energy Select Sector SPDR (NYSE:XLE) has gained nearly 15% year-to-date. Unless you’ve been sleepwalking all year — or just not reading your emails– you know energy has been one of our biggest investing themes of 2014.


Greg Guenthner
for The Daily Reckoning

P.S. XLE (and many energy stocks, for that matter) remain overextended. So if you’re looking for a solid investment in this sector, you’d be better off to wait for XLE to churn sideways a bit before buying with both hands. Sign up for the Rude Awakening for FREE today to see how you can trade these trends for huge gains…

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

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