Wednesday, July 2, 2014


I've advocated for some time that some of the best ways to deploy capital is to pay attention to where you are in the economic environment (expansion/contraction) and weigh where you think you are in the market cycle (bull/bear).  the Market Sector Model highlights areas that tend to do well during those corresponding periods or phases in the cycle.  Frankly, this approach has been pretty successful over the course of many years of investing.  I like this approach, and it keeps me constantly evaluating my positions and where we are heading.

The question becomes, where are we now.  Personally, I feel as though we are right new the middle of the graphic which would suggest that we've gone through a raging bull market, scaled the walls of worry furiously, and reached IPO nirvana which to me signals a market top.  Bonds have been acting weird and energy stocks have been bought with a vengeance.

(Graphics below from

I found this neat little summary that I didn't ever see before which simply restates the original model above.  In a way, I like this graphic even better as it is cleaner, but doesn't overlay the market (bull/bear) phases though.

This version that draws out sectors in energy, healthcare and consumer goods should be performing well and this seems to correspond pretty well with what we've seen in actual trading in the last 5 to 6 months.

I find that this graphic is even cooler as you can drill down into very specific details of each category.  Here's a breakdown of the Consumer Goods, Healthcare, and Energy.

Consumer Goods - Food & Beverage & Tobacco
Healthcare - Medical Equipment & Supplies and Pharmaceuticals
Energy - Oil & Gas and Coal

Coal has been destroyed in the last year or so due to our Presidential war on coal.  As crazy as it may seem, it may be time to consider coal plays like Peabody (BTU).  It is an ugly chart, but the upside reward might be worth a smallish play.

No, I don't think we are through and on to the next phase of Utilities and Telecoms, but that doesn't mean that you don't look at them and you don't start preparing.  In fact, we've commented that utilities have simply been the best performer for the year.  Other market participants may be front running this or simply assume that we are indeed farther along in the cycle than I do.


Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at