Some Hidden Gems in Diversified Industrial Stocks
These stalwarts look cheap, and could benefit from a boost in business spending.
Economic cycles usually play out according to a loosely defined sequential cadence. The depth and duration of each cycle differ considerably over decades, but the sequence of when segments of the domestic economy (loosely defined as consumption, production, and investment) progress through each phase of the cycle is relatively consistent. As we digest second-quarter earnings and study the macro indicators, it's quite apparent that the production-centric section of economy, while still firmly in rebound mode, is bumping up against some headwinds, and that investment-centric names are just starting to heat up.
The Consumer is the Canary in the Coal Mine
Generally speaking, early signs of trouble in the U.S. economy typically show up at the consumer level. Comprising more than two-thirds of overall output, the spending behavior of consumers holds huge sway on the direction of GDP. Once the consumer goes south, production of any goods he or she is no longer buying quickly follows.
Eric Landry does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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