If the trend is your friend, U.S. large-cap stocks will be the place to invest over the next several months, says Jim Porter, manager of the Aston/New Century Absolute Return ETF Fund (ANENX).
Mr. Porter, who uses a quantitative trend-following strategy to manage a portfolio made up entirely of exchange-traded funds, said there is evidence that the international equity markets are “cooling” and that domestic large-caps are heating up.
“I wouldn’t be putting any new money into international until we start to see some improvements in that area,” said Mr Porter, a managing member of New Century Management LLC. “But right now the technology sector looks strong, and I think the U.S. stock market is getting ready to do some catching up with the global markets.”
Much of Mr. Porter’s research is aimed at trying to identify where investors’ money is headed. By his assessment, the stock market is currently in a “sideways pattern,” but he expects the next leg up to be distinguished by specific categories and sectors pulling away from the broader market.
“Now is when you want to start doing your homework to figure out where you want to be,” he said. “Large-cap stocks are starting to get back in the lead where they belong, because people are starting to look for real value in this market.”
In addition to large-cap stocks, Mr. Porter also anticipates increased demand for stocks in the technology, industrials and basic materials sectors.
“A lot of the stock market rally so far has been due to mid- and small-caps doing well,” he said. “From here I think the performance will concentrate more on the 30 Dow Jones stocks and the S&P 100.”
Mr. Porter believes the growing momentum in large-cap stocks will help the Dow Jones Industrial Average, as well as the S&P 100 and S&P 400, to start outperforming the broader S&P 500 index.
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