Playing Defense

AS the economy decelerates , investors need to focus on how their portfolios are balanced . Presently , with slowing growth in the future ( UBS cut its 2H 2006 GDP estimate to 2% from 2.5% , and 2007 GDP to 2.2% from 2.5% ) we need to find the stocks and indices that will perform well as earnings begin to slow .
In such an environment , stocks with little or no correlation to the economy deserve to be over-weighted in a portfolio . These stocks are the Consumer Non-Durables ( XLP ) , the foods , toothpaste , tobacco , beverages , etc. , that people buy no matter what the economy does . Conversely , Consumer Cyclicals (XLY) , the autos , papers , hotels, manufacturers are the stocks that do less well in a slowing economy . Thus , we should overweight XLP and underweight XLY