Although the first half of 2013 promises to be tricky for the stock market, a few sectors show relative strength, JPMorgan (JPM) Chief U.S. Equity Strategist Thomas Lee said Monday.
"We think overall it's going to be a pretty good year for markets because, you know, we're in the fifth year of a bull market," he said on "Fast Money."
Lee pointed to spending on durable goods at a 50-year low and a relative value story vs. high yields.
"I do think that the first half is going to be very tricky, so I think it's really going to be a very good second-half story for equity markets," he added.
Lee, who has a S&P 500 (^GSPC) year-end target of 1,450 for 2012 and 1,580 for 2013, picked cyclical stocks to hold the most upside potential.
He also cited several factors for the selection, including strengthening of China's economy, the possibility of stabilization in Europe and a strong U.S. housing market.
"If you just look at how the market's acted since Dec. 18 - we're actually down a few percentage points on the S&P - the best performing groups have actually been basic materials, industrials, technology. So, for a market that seems to be concerned about the 'cliff,' these are names that are showing a lot of relative strength."
Lee's stock picks included "blue-chip, branded stories" with good management, such as Bank of America (BAC), CapitalOne (COF) and McDonald's (MCD).
Trader disclosure: On Dec. 31, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Brian Kelly is long XLF; Brian Kelly is long QQQ; Brian Kelly is long HONG KONG DOLLAR; Steve Weiss is long BAC; Steve Weiss is long TBF; Steve Weiss is long M; Steve Weiss is long JPM; Steve Weiss is long C; Josh Brown is long AAPL; Josh Brown is long JPM; Josh Brown is long GDX; Josh Brown is long GLD; Josh Brown is long XLU; Josh Brown is long TLT; Josh Brown is long XLF; Josh Brown is long TGT.
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