The reflation trade is still on, and cyclicals will benefit from it next year, says Cetera’s Gene Goldman. His bullish call on cyclicals is primarily based on valuations that he says are still very cheap.
Highlights from Goldman’s interview on CNBC’s ‘Worldwide Exchange’
Within cyclicals, the one sector that particularly pops out to him is Energy. Stating his reasons why, he said this morning on CNBC’s “Worldwide Exchange”:
We do see a nice trend upward in Energy. Inventories are falling on rising demand. Too little capital spending for oil and gas projects. The U.S. oil production is about 2 million barrels less per day than it was pre-pandemic.
Other sectors he likes in cyclicals include materials and industrials. The three sectors are the worst underperformers of the S&P 500 over the last six months, which suggests a rebound is in the offing, considering the earnings estimates for 2022 are promising for all three, Goldman concluded.
Goldman on what to expect from the U.S. Federal Reserve today
Commenting further on what to expect from the U.S. Federal Reserve later on Wednesday, Goldman said the Fed was likely to increase the pace of tapering from $15 billion a month to $30 billion a month in a bid to end asset purchases before the start of Q2.
He’s also modelling for two rate hikes next year that’ll represent a major policy shift for the Central Bank that, in September, was leaning more towards waiting until 2023 to start raising rates. According to Goldman, inflation could start moderating next year.
The outlook is in line with Pictet Wealth Management’s Thomas Costerg, who also said on Wednesday that inflation in the United States was likely to come down sharply in the back half of 2022.
The post Pro explains why energy is his top pick in cyclicals for 2022 appeared first on Invezz.