Materials stocks may signal second half slowdown

Materials stocks may be flashing a warning signal.

A current reversal within the S&P 500 basic materials index might imply development is about to hit a wall, Miller Tabak’s chief market strategist, Matt Maley, advised CNBC’s “Trading Nation” on Tuesday.

“From March 2020 until May of this year, the materials stocks outperformed in a major way,” up round 130% versus a 90% achieve for the broader S&P 500, Maley mentioned.

But supplies stocks have stalled since their May 17 peak, falling 5% whereas the S&P has climbed 5.5%.

A reversal like that from such an economically delicate sector mixed with falling rates of interest and oil costs might spell hassle for development for the remainder of 2021, Maley warned.

“We’re having several things outside of the stock market, but also within the stock market, that are telling us that we may have to put on the brakes a little bit about our enthusiasm about growth in the second half,” he mentioned.

Add new mask mandates and slower-than-expected manufacturing growth to the combo, and buyers must be interested by defending their portfolios, New Street Advisors Group founder and CEO Delano Saporu mentioned in the identical “Trading Nation” interview.

“Investors could start looking at the diversification in their portfolio, start looking at asset allocation, those other areas to put money in if we see some sort of slowdown in equities because we know equities have run up a lot since … the trough in March of 2020,” Saporu mentioned.

“From my standpoint, I’m definitely looking at that for clients and for myself.”

In an e mail to CNBC, Saporu mentioned buyers “need to have enough exposure to defensive/alternative assets,” highlighting cyclical teams such because the health-care sector and cryptocurrencies similar to bitcoin.