Markets

Certain sectors could be a 'trap' as stocks rally, strategist says

Key Points
  • Markets have broadly advanced this week as countries begin plotting the reopening of their economies, with the spread of the pandemic showing early signs of stabilizing.
  • State Street Senior ETF Strategist Rebecca Chesworth told CNBC on Friday that the sheer scale of job losses in the U.S. meant rebounds in consumer sentiment face significant hurdles.
  • More than 22 million people have filed jobless claims since the coronavirus crisis began, almost wiping out all the jobs gained since the Great Recession.
The Ford Motor Co. Michigan Assembly plant stands idle in Wayne, Michigan, U.S., on Monday, March 23, 2020.
Anthony Lanzilote | Bloomberg | Getty Images

As stock markets worldwide rally on the back of promising news of potential coronavirus treatments, some sectors could be a "trap" for investors, according to State Street Senior ETF Strategist Rebecca Chesworth.

Friday's rally came after news that a drug developed by Gilead Sciences was showing some effectiveness in treating the coronavirus.

Markets have broadly advanced this week as countries begin plotting the reopening of their economies, with the spread of the pandemic showing early signs of stabilizing. However, Chesworth told CNBC's "Street Signs Europe" on Friday that the sheer scale of job losses in the U.S. meant rebounds in consumer sentiment face significant hurdles.

More than 22 million people have filed jobless claims since the coronavirus crisis began, almost wiping out all the jobs gained since the Great Recession.

"That is a significant toll to take on the household budget, and therefore a lot of the stocks which have been moving in the last two weeks — and let's be honest, it's been quite a crazy rally given what has been going on in the background — but what we're seeing is people get excited again about retailers, leisure companies, luxury, autos, and that really does seem to be a bit of a trap at the moment," Chesworth said.

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Certain sectors 'a trap' as stocks rally, strategist says

She also revealed that State Street ETFs (exchange-traded funds) had seen extremely high volumes of trading in health-care stocks in recent days for a multitude of reasons.

"On the one hand, this is a defensive sector, so it is a natural place to run to. It is a place where you have got strong earnings growth and really where you have not seen any downgrades thus far," she said.

"So there's that in the background, plus the fact that you have your political concerns in the U.S. largely quashed. On the other hand, we've got a large number of manufacturers either involved in the ramping up of testing, looking for a vaccine or looking for a cure."