Bernstein declares that his top theme is “sell the retailers” – or perhaps rotate into discount retailers. He gives two rationales for this tactic: gasoline prices may continue to fall or at least hover at lower levels; and the possibility of a hike in the minimum wage next year. Both events would raise the disposable income for many discount-retail customers.
The strategist’s second theme is the “potential for a cyclical bear market in commodities.” He concedes that Merrill Lynch had been “the first to say (commodities) would be the theme of the decade.” But he points out that in the last six months, "you’ve seen almost an euphoria in speculation – right at a time when fundamentals seem to be eroding.” He points to a sobering statistic, saying non-OPEC production for 2007 is slated to “be the biggest in 30 years.”
And Bernstein’s No. 3 theme: “high-quality technology.” He chuckles that “since Nasdaq's inception in 1971, S&P utilities have actually outperformed” the exchange. His advice: mine the Nasdaq for “large-cap, high-quality brand names as a group.” He suggests that for technology-firm investments, the key phrase is ‘the names we know’.”