The S&P 500 continues to climb higher this summer (up over 16% for the year), offering opportunities that traders can capitalize on when looking at specific sectors and outside domestic equities. In a recent The Street article, Thomas Hayes, chairman of Great Hill Capital in New York, identified three areas where opportunities may arise: biotech, REITs, and emerging markets (EM). Now, the second half of the year is underway. They could see strong performances through the summer and to the end of 2023.
“The magic will be found under the surface in coming quarters as laggards from the first half start to outperform leaders on a relative basis,” he said, also noting that “While the majority of strategists have been looking for a 20% reduction in earnings since October, instead we got a 25% rally in the S&P 500. When everyone is on one side of the boat, it pays to think independently. As for now, people are still preparing for an imminent recession that may not come.”
As Hayes mentioned, bullish biotech traders may want to capitalize on opportunities like the (LABU ). LABU seeks daily investment results of 300% of the daily performance of the S&P Biotechnology Select Industry Index, which is designed to measure the performance of the biotechnology sub-industry.
Real Estate and EM
The anticipation of less rate hikes could prop up the real estate market. This holds especially during the summer, when the market typically heats up. That said, traders may want to look at the (DRV ).
DRV seeks daily investment results equal to 300% of the inverse of the daily performance of the MSCI US REIT Index. The index is a free float-adjusted market capitalization weighted index. Equity REITs included in the MSCI US Investable Market 2500 Index comprise it.
A bounce back could also be in the works for EM. This is especially true with the U.S. dollar losing its momentum heading into the start of 2023. Traders can play that move with the (EDC ). EDC seeks daily investment results equal to 300% of the daily performance of the MSCI Emerging Markets Index. The index represents the performance of large- and mid-capitalizations securities across 26 emerging market countries. Looking at its top holdings, there’s an obvious tilt towards Asia. India and Brazil round out the top five country allocations.
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