Sure, the market is stretched.
But overbought begets overbought.
With that being said, it may be time to take a look at some more defensive areas if you're looking to allocate fresh capital.
What is defense? Here are some characteristics.
- Higher Dividend. You'll be paying for income rather than growth.
- Boring industries. These are often well established companies.
- Low Beta. Movement is rarely volatile.
We normally think of defensive stocks as sectors such as healthcare, utilities, and consumer staples. A quick way run through these names is to look through the individual components of $XLV, $XLU, and $XLP, respectively.
Why do these names make sense here?
Think about market outcomes. If we continue to rip higher, a rising tide will lift all boats and you will see capital appreciation. If the market dips, then investors will most likely do what they did last quarter-- flock into the "safety" of high-dividend, low beta names.
Here's a look at some constructive charts: