U.S. has a one-way ticket to a low-growth economy. Either the economy will be too weak for the Fed to raise interest rates or the Fed will raise interest rates in order to create a low-growth environment.
Either way, there is no avoiding low growth. So what if the Fed does raise interest rates?
If this were the old days, investors would go for industrial stocks because their earnings will improve as the economy improves. However, that is no longer possible as most big industrial companies have become too dependent on overseas earnings, and a stronger dollar will create challenges as cash floods into the U.S.
Investors need to start to be careful when reaching for trades that have always worked in the past. In addition to skepticism about the industrials, that also means investors must be careful when buying large tech companies that have exposure to Europe.
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