• Tech stocks’ time in the spotlight is over, and investors should begin shifts to value stocks and cyclical sectors, James Paulsen, chief investment strategist at The Leuthold Group, said in a recent note.
  • The S&P 500’s brief Thursday correction marks “an opportunity to ‘broaden your bets'” before valuations rebound, Paulsen said.
  • Money supply growth surged in recent months on the back of Federal Reserve easing and the CARES Act. That trend has preceded economic expansions by 12 months in all eight recessions since 1960, according to the strategist.
  • The cyclical sectors that avoided bankruptcy during coronavirus lockdowns “may currently be positioned with the greatest upside profit leverage,” Paulsen said.
  • Still, investors should hold on to some growth positions as their fundamentals remain healthy, he added.
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The S&P 500’s brief correction opened the door for a shift to neglected corners

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IHS Markit’s PMI surveys indicated a strengthening of global economic growth in August, with a broadening out of the recovery by sector evident. Some important sectors, such as autos, real estate, and households goods, are now among the top performers as the easing of lockdowns from the height of the pandemic continues to benefit key parts of the global economy, such as factories, housing markets, construction and high streets. However, many sectors remain in decline due to ongoing social distancing measures, and some waning of performance was also recorded in many sectors in August, casting a shadow over the near-term outlook.

Hard-hit sectors start to enjoy stronger growth

Output rose in 20 of the 26 manufacturing and service sub-sectors covered by the PMIs during August, the highest number since March of last year, indicating a broadening out of the economic recovery.

All manufacturing sectors reported growth, but the picture was

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