SlateStone strategist: US stocks still have room to rise, but should shift towards defensive sectors.

SlateStone's chief stock strategist Erin Gibbs recommends that investors maintain a generally bullish outlook but adopt a defensive positioning in the US stock market. She believes that investors should withdraw from overvalued tech stocks and shift towards defensive sectors such as healthcare and telecom, which may offer better value as the US stock market rally slows down. Erin Gibbs stated, "This is exactly what we hope to see to sustain this bull market." She referred to the expansion of market participation from AI-related companies to a broader range of sectors. The strategist also acknowledged the issue of market concentration in the US stock market, particularly with the so-called "Big Seven" - Alphabet Inc. Class C (GOOGL.US), Amazon.com, Inc. (AMZN.US), Apple Inc. (AAPL.US), Meta (META.US), Microsoft Corporation (MSFT.US), NVIDIA Corporation (NVDA.US), and Tesla, Inc. (TSLA.US) - which currently make up about one-third of the entire market. However, Erin Gibbs does not recommend completely exiting US stocks but instead advocates tactical adjustments. She noted, "I'm not saying you should sell all US stocks, but certainly, some companies - especially those with significant increase in capital expenditures, declining profitability, and decreasing profit margins - should be approached with caution." She specifically mentioned Thermo Fisher Scientific (TMO.US) as a quality target with potential for sustained profit growth in the healthcare sector. When asked about the upcoming inflation data and the possibility of a rate cut by the Federal Reserve, Erin Gibbs stated that a rate cut would be a "cherry on top" but not a necessary factor to maintain market strength. She added, "Of course, I would like to see long-term interest rates and mortgage rates decrease - that would truly benefit the other end of the economy." Looking ahead to earnings season, Erin Gibbs is optimistic about the overall market performance. She expects the overall earnings performance of the S&P 500 index to be "quite impressive" and noted an unusual phenomenon - earnings expectations are being revised upward rather than downward before earnings announcements. Finally, she mentioned that the productivity boost from AI will benefit more companies beyond the tech industry.