Why Now Is Not The Time To Jump Into Cyclical Plays Quite Yet

The question of whether we’ve officially crossed over from the lows experienced in late March toward a central bank-fueled bull market is one I don’t have the answer to now.

That said, unlike a number of market pundits who believe we’ve already seen the worst, I do think the stock market is pricing in some ridiculously high-growth estimates given economic fundamentals which can only be described as disastrous.

Those who are bullish on a full-scale economic recovery and believe we’ve already entered such a phase continue to invest in highly cyclical sectors like airlines and travel.

While I do think these sectors will eventually recover and government stimulus and support will help buoy these sectors in the near-term, it appears to me that the overall financial market continues to retain a level of positive sentiment I can only classify as irrational.

Warren Buffett, for example, is one of the few market leaders who shares a perspective I can identify with. Broadly bullish on the long-term ability of America, and North America broadly, to lead in providing growth, but cautious with respect to short-term fundamental structural weakness in highly cyclical sectors like airlines, Buffett recently announced the sale of all his stakes in the airline sector in early May, reversing his view that the airlines had found a way to become the cash cow he had hoped they would become in the past.

For now, I would encourage all investors to take such a view. Patience is a virtue, and I think now is the time to wait.

Invest wisely, my friends.