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If You Believe in Economic Recovery, Now Are the Right Cyclical Sectors for Investment

On Wall Street on Friday, the Dow Jones and S&P 500 indices reached new all-time highs as strong macroeconomic data boosted stock prices in sectors tied to economic growth.

The Dow Jones strengthened by 121 points, or 0.80 percent, to 15,354 points, while the S&P 500 rose 0.95 percent to 1,666 points, and the Nasdaq index increased by 0.97 percent to 3,498 points. The new records for the Dow Jones and S&P 500 indices are attributed to data indicating an economic strengthening, which has driven stock price increases in the industrial and energy sectors.

Consumer sentiment in the U.S. reached its highest level in nearly six years at the beginning of May, while leading indicators of economic activity for the upcoming period hit a five-year high.

Recently released data had suggested a slowdown in the growth of the world’s largest economy in the second quarter, after it grew by 2.5 percent in the previous quarter. However, the latest reports indicate that growth may not be slowing down.

– Although slowly, the economy is recovering. Given the situation in other parts of the world, the U.S. market, despite some weaknesses, remains the best place for investment at this time – says Doreen Mogavero, director at Mogavero, Lee & Co. Strong macroeconomic data have spurred stock price increases in sectors related to economic growth, with the S&P industrial sector index jumping 1.4 percent yesterday, and the energy sector by 0.8 percent.

– If you believe that the economy will gradually recover, now are the right cyclical sectors for investment, which have lagged behind the growth of other sectors – says Michael Sheldon, strategist at RDM Financial. Thus, the upward trend in stock prices continued yesterday, which had paused the day before as investors were unsettled by announcements that the U.S. central bank might begin to unwind stimulative monetary measures, which have been the main drivers of strong stock price growth in recent months.

Throughout this week, the Dow Jones has strengthened by 1.6 percent, while the S&P 500 jumped by 2 percent, and the Nasdaq index by 1.8 percent, marking the fourth consecutive week of growth. Since the beginning of the year, the Dow Jones has risen by 17.2 percent, while the S&P 500 has gained 16.8 percent, and the Nasdaq index 15.9 percent.

European stock markets also saw stock prices rise yesterday. The London FTSE index strengthened by 0.53 percent to 6,723 points, while the Frankfurt DAX rose by 0.34 percent to 8,398 points, a new all-time high, and the Paris CAC increased by 0.56 percent to 4,001 points.