Market drop may be a sign of impending economic slowdown

“The rotation from technology stocks to banks, industrials and pharmaceuticals may be foreshadowing a slowdown in economic activity and an end to central bank tightening,” says Cooper in a press release.

She admits that current data doesn’t seem to make that case, but she contends that equity investors may be looking further down the road. Cooper says commodity prices appear to have peaked and there are signs of slowing in the U.S. as supply constraints begin to bite. If a slowdown does materialize bonds can be expected to rally, followed closely by interest-sensitive stocks such as banks. The value investors moving into these areas may see something others don’t yet, says Cooper.

“A slowdown in economic activity to a more sustainable 3% to 4% pace is welcome news. So is a rotation to quality in the stock market. This will prolong the economic expansion and give new life to the bull market in stocks.”