NEW YORK (TheStreet) -- After hitting new market highs last week, the market has been trading off this week. Several key elements have given market investors the excuse to de-risk their portfolios this week:
1) Quarter-end rebalancing: Investors are rebalancing their portfolios, away from equities and into bonds and other asset classes.
2) Geopolitical risks: The situation in the Middle East continues to be unstable with ISIS increasing its stronghold in Iraq and now Israel and Hamas are threating to go to war.
3) European Economy: Troubles at one of Portugal's top banks reignited concerns about the health of the overall European economy and languishing economic recovery in the Eurozone.
4) Earnings Season: Corporate earnings season is about to kick into high gear further fueling market uncertainty, but also substantiating or derailing market valuations.
5) FOMC Minutes: The Fed is becoming increasingly concerned about how Fed-driven liquidity might be creating "excessive risk taking" in the economy. They also acknowledge that economic data continues to be mixed. Overall the Fed minutes were in line with expectations, but readers see what they want to see to justify their market positions.
So it remains to be seen if this week's sell-off in the market in a short-term retrenchment or the start of a longer trend for the second half of the year. Most market pundits remain bullish on the market for the second half of this year, given continued improvement in the U.S. economy and employment picture. But there are definitely some pockets of weakness in the economy such as retail.
Reporting disappointing results earlier in the week, The Container Store's (TCS) CEO shared that it was experiencing a "retail funk". Apparently sluggish retail sales are not just about "the weather" after all. While consumers are buying homes and automobiles and other high ticket items, specialty retailers like The Container Store did not experience the much-hoped uptick in sales in the spring. Other retailers such as Family Dollar Stores (FDO), Wal-Mart (WMT), Lumber Liquidators (LL) and Tractor Supply (TSCO) have also experienced weaker-than-expected sales in the second quarter.
Is the consumer being more selective with their spending behavior? Online and mobile shopping is facilitating an increasingly promotional environment for brick and mortar retailers. Discount shoppers are requiring bigger and bigger discounts to bring them into the stores. Interestingly, luxury brands appear to be doing better in this environment suggesting that "aspirational" consumers are willing to pay up for certain brands and shopping experiences. The iconic British luxury brand Burberry, for example, reported better-than-expected results, tempered only by the strong British pound.
Generalized market sell-offs can create market opportunities. Here are a few such potential opportunities:
Under Armour (UA)
One brand bucking the trend in the weak retail environment in apparel-maker Under Armour. It traded up in June in sympathy with Nike's (NKE) strong earnings results. Under Armour reports its earnings results on July 24. Under Armour is one of the retail brands experiencing strong brand momentum in the active lifestyle apparel segment. Even given the weak retail environment, earnings estimates for the company appear easily achievable. Longer term, the company's international expansion of the brand is just in its infancy. Although the stock trades at a premium valuation of 50 times next year's earnings, it remains an earnings growth story to be reckoned with and a broader scale retail sell-off could provide a nice entry point ahead of results.
Tableau Software (DATA)
One of the positive side-effects of a low interest rate environment is low cost of capital. Given that companies expect that rates will be going up next year, there may be a wave of M&A activity in the second half of the year, particularly in the ever-competitive technology space. Large tech behemoths such as IBM (IBM), Microsoft (MSFT) and Oracle (ORCL) are all trying to play catch-up in the race for superiority in the enterprise segment.
One of the biggest challenges for enterprises going forward will be managing data and more specifically the understanding and harnessing its power. Seattle-based Tableau Software is a developer of business analytics software that empowers the enterprise to analyze data effectively. Companies like Tableau and its strategic partner Splunk (SPLK) seem like good candidates to be acquired going forward by one of the large enterprise players trying to ramp-up their superiority in "big data". Again, a market pause might provide a nice entry point for this stock as well.
At the time of publication the author is long UA.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.