Which Sectors Are You Betting On? - Real Time Insight

By Todd Bunton,

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So far in 2014, the Transportation sector has been the best performer in the S&P 500, rising +11.7% year-to-date. It's easy to see why: a whopping 82% of companies within the sector have delivered positive earnings surprises this earnings season, compared with 66% for the overall S&P 500. Even more remarkably, 82% of Transportation companies have beaten on the top line too, crushing the S&P 500 average of 61%.

The Medical sector has been hot too, rising +11.3% so far in 2014. A full 78% of companies within the sector have beaten earnings estimates this earnings season.

Meanwhile, Conglomerates have been trailing the pack this year with the sector down -3.5% year-to-date. Just 43% of companies within the sector have beaten earnings expectations this earnings season.

You can see the data from the rest of the sectors below (note that Zacks slices the S&P 500 into 16 sectors instead of 10):

So which sectors do you think will outperform or underperform throughout the rest of 2014?

My sector bet to outperform is Transportation. The reasons: (1) companies are beating expectations on both the top and bottom lines, (2) earnings growth is solid, (3) oil prices could continue falling, and (4) the price momentum is strong.

My sector bet to underperform is Finance. The reasons: (1) earnings growth is flat, (2) the yield curve could continue to flatten, pressuring banks' net interest margins, (3) refinancing activity is dead and will likely not come back for a long, long time, and (4) banks have been boosting their bottom lines by taking lower provisions for loan losses despite strong growth in subprime auto loans, which have historically high default rates.

Please share your picks below!

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SPDR-FINL SELS (XLF): ETF Research Reports

SPDR-HLTH CR (XLV): ETF Research Reports

SPDR-CONS DISCR (XLY): ETF Research Reports

SPDR-SP TRANSPT (XTN): ETF Research Reports

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing Stocks
Referenced Stocks: XLF , XLV , XLY , XTN

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