- Leuthold’s Jim Paulsen told CNBC he’s already seeing a rotation into cyclical stocks, and industrials, financials, energy, and small-caps are four areas poised to benefit.
- The chief investment strategist said many cyclical stocks have done well since the S&P 500’s lows in March.
- Investors don’t need to go to the “epicentre of the pandemic” and buy stocks that are ultra-sensitive to COVID-19 to play this rotation.
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Leuthold’s Jim Paulsen told CNBC on Wednesday that a rotation into cyclical stocks has already started taking place.
The chief investment strategist said that since the S&P’s 500 March 23 low, he’s seen cyclical stocks, small-cap stocks, the equal-weighted S&P 500, and even international markets do well. Many have even outperformed the S&P 500 on a cap-weighted basis, Paulsen said.
“I think a rotation is already taking place. It’s not dramatic, it’s not robust, but I think it’s already starting and it’s going to get more robust in the coming year,” he added.
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Paulsen recommended investors buy stocks in these four areas: general industrials, financials, well-financed energy, and small-caps. Investors don’t have to go to the “epicentre of the pandemic swing” and invest in an industry like travel to play this rotation, he added. If investors stay in these four industries they can “have a pretty big bet on a leadership shift but not necessarily have to bet everything on just COVID shifting.”
The Russell 2000 index, a small-cap index, is up more than 54% from March 23, and up more than 7% since last year. The S&P Industrials SPDR ETF (XLI) is up 51% since March 23 and up 6% since last year.
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