Dividend Stocks to Lag, Cyclicals to Lead

Investors are rotating from defensive, dividend paying stocks to cyclical names as the market continues to move higher and the economy improves, two analysts told CNBC on Thursday."I think that we've seen the pattern start six weeks ago. It's been all cyclicals," said Scott Wren, senior equity analyst at Wells Fargo. "That was after a good run from the defensives. I think that's over. I think the pattern for the next 18-24 months is going to be very cyclical for the market."

Wren said his firm is advising clients who are overweight in health care, staples and utilities to rebalance their portfolios into more cyclical names. "Over the next 12 months you'll see those defensives higher, but they're going to lag in a big-time way from the cyclicals." He said he doesn't see this trend ending anytime soon. "This rotation is going to continue. We could easily see something north of 1,800 in the S&P by the end of 2014. I think that will be a cyclically led market." He warned, however, that if there is a massive selloff, defensive names will become relatively more attractive.

Source: CNBC

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