The following is an excerpt from Zacks Chief Strategist John Blank’s full Nov Market Strategy report To access the full PDF, click here.
October was a brutal month if you owned stocks.
On Nov.1st, the S&P 500 traded at 2711. Thirty days earlier, the S&P 500 traded at 2920. We lost 209 points, and went -7.1% lower. YTD returns were +9.4%. They sit at +1.4%.
Stocks must somehow put the 2018 bull trend back together in 2 month’s time, so we can call it a low double-digit returns year.
That looks much more doubtful now. But it is do-able.
With higher rates and the U.S.-China trade war as headwinds, U.S. stocks have a set of storm clouds on the horizon.
That bearish storm blasted growth stocks in October.
Since a stock market correction is also not good for incumbents (competing in the looming U.S. elections), a high-level meeting has been set between Xi and Trump. It happens in late November at the G20.
That means there is a bull case, too.
This U.S.-China trade war is just the latest in a long line of historical political disputes concerning the country’s Federal stance vis-à-vis the Rest of the World.
These party disputes usually extend their reach globally, into a variety of intertwined Federal policies. You might not realize that. Reflect back on the intertwined triad of Trade, Immigration and Security.
All of us, regardless of whether we are located inside the USA or outside it, will face consequences from this U.S. midterm election. And those consequences can be more wide-ranging and severe than any of us wish to consider.
In a 1948 speech to the House of Commons, Winston Churchill altered philosopher George Santayana’s famous quote slightly. He said to the members, 'Those who fail to learn from history are condemned to repeat it.'
More and more, that looks exactly like what we did.
Zacks November Sector/Industry/Company Telescope
To no surprise, given a strong Q3 earnings season performance, the Zacks Industry Ranks coughed up 3 Very Attractive sectors, and 3 Attractive Sectors.
Strength is broad. In Energy, attractive industries run across the board. Ditto Health Care. One must surmise the steady increase in Obamacare enrollments funds lots of businesses.
In Info Tech, the Semis are back on top. I am not surprised again. But hedge fund shorting took down many of these chip stocks in October. Telco equipment — with the 5G upgrades underway — is another sweet spot.
Consumer Staples look sorry. Just Agri-business is strong. The rest look poor.
(1) Energy gets upgraded to Very Attractive. All industries other than drilling are on fire. Take a look at Energy-Alternates, Coal, and Oil & Gas Integrated and E&P.
Top Zacks Stock Pick: Hess Corp. (HES - Free Report)
New York-based Hess Corporation, previously known as Amerada Hess Corp., is a global exploration and production company. It develops, produces, purchases, transports and sells crude oil and natural gas.
(2) Health Care stays Very Attractive. The leader is Medical Care again.
Top Zacks Stock Pick: Molina Health (MOH - Free Report)
Molina Healthcare, a multi-state health care organization. It arranges for the delivery of health care services and offers health information management solutions to individuals and families who receive their care through Medicaid, Medicare and other government-funded programs.
(3) Industrials stay Very Attractive. The three industries that are best for picks are Pollution Control Aerospace & Defense, and Railroads & Trucking.
Top Zacks Stock Pick: Tetra Tech (TTEK - Free Report)
Tetra Tech, Inc. is a leading provider of consulting, engineering, program management, construction management and technical services.
The company supports government and commercial clients by providing innovative solutions focused on water, environment, infrastructure, resource management, energy and international development.
(4) Financials are Attractive. The leader is the cyclical Insurance industry. Behind that, I see Finance and Investment Funds.
(5) Consumer Discretionary rises to Attractive. There are no best of the bunch. But Non-food retail, and Leisure Services look the solid.
(6) Info Tech is spotty, and I say Market Weight. But the leader is Semis once again, with Telco Equipment also very strong.
(7) The new Communications Services group is a Market Weight.
(8) Utilities are a Market Weight.
(9) Materials are now Unattractive. Only one strong spot bucks this: Paper.
(10) Consumer Staples stays Very Unattractive. But there is one glaring exception in October. Agri-business is a Very Attractive industry.