Cyclicals vs Defensives

The Fed's decision to scale back intended interest rate hikes reflects economic reality.

While we are neutral the broad industrials sector (please see yesterday's Insight) and sub-surface exposure should remain selective, we continue to recommend an above benchmark weighting in the BCA defense index. Following years of global government austerity, rising global fiscal thrust should…

Economic disappointment represents a serious obstacle for stocks. Stay with non-cyclical plays, including telecom services and health care. Upgrade the managed care group, and stay clear of banks, regardless of cheap valuations.

With the broad market struggling to find a floor in the midst of a disappointing earnings season, it still pays to play defense. This week's ISM releases reinforce that a defensive over cyclical portfolio bias is still warranted. The bottom panel of the chart shows the relative employment…