Since bottoming on March 23, 2020, the S&P 500 has risen 57.5% – setting an all-time high in the process.
This is all because while the world seemed to stop turning for a lot of us, we were still finding ways to spend money.
Since the pandemic hit the U.S. back in early March, things have changed drastically. People are finding new ways to spend their money. According to a report from CNBC, grocery store spending was up 54% in February and March, while restaurant spending dipped 44% in March and April.
People are spending more time at home, which means they are spending more money on their home.
I’m not a betting man, but I’d put money on the fact that you’ve probably purchased some things to make your “stay and work from home” situation a little easier to swallow.
That purchase could have been a new pair of sweatpants to make WFH on the couch a little cozier, or some games to keep the kiddos entertained. Maybe you got ambitious and finished that spare bedroom you’ve been meaning to get to. I bet one or two of you even hopped on the bread-making train and put in an Amazon order for some baking trays and mixing bowls.
I know I am at the point that I have my credit card numbers memorized – a point I certainly never thought I’d get to!
That same report said that 64% of Americans have changed their spending habits since February, and I think we can all say that we’ve contributed to that.
And while spending habits changed, one sector shot to the moon – turning into the hottest sector of 2020.
This hot sector is filled with profit potential – here’s how to play it…
Consumer Discretionary Is 2020’s Hottest Sector – Here’s How to Profit
It’s no surprise that money has been flowing into the market, but the big question on the table is: Where?
The best way to find the answer is with sector analysis. Let’s look at a section of the economy in which businesses share similar products and services.
You know the age-old adage, “birds of a feather flock together?” Well, the same can be said for stocks in the same sector – and this is where we will find our profit opportunity.
Since the market bottomed in March and began its meteoric recovery, there are a few areas that have led the charge.
The Select Sector SPDR’s website offers a free and reliable sector analysis, so let’s take a look.
Here is a six-month view of the Sector SPDRs:
Taken from www.sectorspdr.com
As you can see, every sector
except energy has risen over the past six months. This should come as no surprise considering how far the market has moved since March.
The top two most bullish sectors are the Select Sector SPDR Trust Consumer Discretionary ETF (NYSE: XLY) and the Select Sector SPDR Trust Technology (NYSE: XLK), rising 37.15% and 35.84%, respectively.
If you consider the “stay-at-home” impact of COVID-19, it just makes sense. People are on the internet buying stuff that they really don’t need – i.e., discretionary stuff!
This is the basic driving force behind these two sectors.
Let’s look under the covers at the leading sector, Consumer Discretionary, using a sector heat map:
Taken from www.sectorspdr.com
Bigger boxes mean bigger market caps and vice versa. The darker green, the more bullish the stock.
So, although Amazon.com, Inc. (NASDAQ: AMZN) is the biggest company in the sector and has performed well over the past six months, it has not performed as well as others.
Here are the top five performing stocks in this sector:
Each of them has at least doubled over the past six months.
And we can expect more upside from here in these leaders of the leading pack! Buying any of these stocks is a great move.
L Brands (NYSE: LB) is a global woman’s apparel and beauty products retail holding company that includes brands like Victoria’s Secret, Bath & Body Works, La Senza, and Henri Bendel.
LB has risen 163.64% over the past six months and is leading the discretionary pack. It is likely to continue to lead and is currently only trading at about $32 a share!
The top five also include clothing retailer, Gap Inc (NYSE: GPS), which has benefited from increased online shopping sales, and homebuilder Lennar Corporation (NYSE: LEN), which has skyrocketed from increased home sales.
Want more diversity?
Trade the XLY. Although it hasn’t risen as much as the top five, it is not subject to sudden moves that individual stocks can suffer, and it will continue to rise as money is funneled into the hottest sector of 2020.
This same trading logic can be used in the Tech sector, which is as bullish as Consumer Discretionary.
But these sectors aren’t the only ones on a tear.
One of the most lucrative markets out there actually has nothing to do with stocks at all.
I’m talking about currencies. But not the dollar, the yen, or the euro. Sure, they’re important to watch – but their profit potential is nothing compared to that of the cryptocurrency market.
And get this – I’m not only talking about Bitcoin either. Because Bitcoin is expensive – $12,800 as I type. And it’s about to get even bigger.
Instead, I’m narrowing in on a tiny area in the crypto market. One that’s cheaper and more powerful than Bitcoin.
In fact, it’s where I believe the next millionaires will soon be minted.
And I want you to be one of them.
I’ll talk all about this area of the crypto market in this video. Give it a watch soon – your opportunity to receive my cryptocurrency trading recommendations closes on Sunday, October 25 at midnight.
Until next time,
Tom Gentile
