Cyclical Stock Appeal

• The second derivative of earnings for many S&P 500 companies is becoming more attractive, meaning their earnings growth rate is increasing.
• This shift makes them appealing to investment managers, leading to increased investment and rising stock prices.
• A key factor is the return to expansion in manufacturing indices, influenced by improving global manufacturing conditions, especially in China.
• This benefits cyclical companies previously hampered by a goods recession.
• Inventory levels are rising, potentially due to tariff concerns, but the overall trend favors cyclical stocks.