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Tuesday’s Nov. 8th U.S. midterm elections should clear up recent political uncertainty.
Stock markets never like any flavor of uncertainty.
How should eager investors play fresh bullish sentiment?
Next is one fresh ETF idea.
II. Where to Put Fresh Money to Work
Many investors seek the next U.S. tech stock rotation, away from sinking prices and tepid fundamentals found on FAANG mega-caps. Semis are one place to investigate.
An outperforming 5-year return jumps out at me. That comes from the holdings inside XSD, the SPDR Semiconductor ETF.
XSD tracks the S&P Semiconductor Select Industry Index, which represents the Semiconductor sub-industry portion of the S&P Total Markets Index (TMI):
The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges
This Semiconductor Index is a modified equal weight index
XSD’s modified equal portfolio weight construction, drawing from the widest range of semiconductor stock exchange listings, becomes the key excess returns factor.
In addition, XSD’s relatively lower expense ratio, at 0.35%, is much better than active stock picking costs seen in the Invesco Dynamic Semiconductors ETF (PSI - Free Report) , at 0.56%, and in First Trust NASDAQ Semiconductor ETF (FTXL - Free Report) , at 0.60%.
III. Zacks November Sector/Industry/Company Telescope
With about a third Q3 S&P500 EPS reports in the game, this was the NOV look.
Entering NOV, the Zacks Industry Ranks offer just one Very Attractive sector: Energy.
Financials have slid to Attractive. Banks & Thrifts prospects keep rising with interest rates. Insurance looks great.
Now in the top third of sectors, Health Care stays at Market Weight.
Consumer Staples fell to Market Weight. Agri-business is the standout there. In a Very Unattractive Consumer Discretionary sector, the Leisure industry remains excellent.
Info Tech stayed an Unattractive sector. Software Services is the standout. The Semis look awful. The Communication Services sector is Unattractive.
Industrials are now Unattractive, and Materials are Very Unattractive. Utilities stay Very Unattractive. The Electric Power industry is the best at Market Weight.
(1) Energy stays the top sector, remaining firmly at Very Attractive. Top industries here are Oil Misc., Coal, Oil Drillers, and Oil & Gas Integrated.
(2) Financials moved to Attractive from Very Attractive. Banks & Thrifts and Insurance remain the best. 2023 recession worry, and Fed rate hiking remains relevant.
Image: Bigstock
Elections to Clear Up Uncertainty: Zacks NOV Strategy
The following is an excerpt from Zacks Chief Strategist John Blank’s full Nov Market Strategy report To access the full PDF, click here.
I. Intro to U.S. Markets
Tuesday’s Nov. 8th U.S. midterm elections should clear up recent political uncertainty.
Stock markets never like any flavor of uncertainty.
How should eager investors play fresh bullish sentiment?
Next is one fresh ETF idea.
II. Where to Put Fresh Money to Work
Many investors seek the next U.S. tech stock rotation, away from sinking prices and tepid fundamentals found on FAANG mega-caps. Semis are one place to investigate.
An outperforming 5-year return jumps out at me. That comes from the holdings inside XSD, the SPDR Semiconductor ETF.
XSD tracks the S&P Semiconductor Select Industry Index, which represents the Semiconductor sub-industry portion of the S&P Total Markets Index (TMI):
XSD’s modified equal portfolio weight construction, drawing from the widest range of semiconductor stock exchange listings, becomes the key excess returns factor.
In addition, XSD’s relatively lower expense ratio, at 0.35%, is much better than active stock picking costs seen in the Invesco Dynamic Semiconductors ETF (PSI - Free Report) , at 0.56%, and in First Trust NASDAQ Semiconductor ETF (FTXL - Free Report) , at 0.60%.
III. Zacks November Sector/Industry/Company Telescope
With about a third Q3 S&P500 EPS reports in the game, this was the NOV look.
Entering NOV, the Zacks Industry Ranks offer just one Very Attractive sector: Energy.
Financials have slid to Attractive. Banks & Thrifts prospects keep rising with interest rates. Insurance looks great.
Now in the top third of sectors, Health Care stays at Market Weight.
Consumer Staples fell to Market Weight. Agri-business is the standout there. In a Very Unattractive Consumer Discretionary sector, the Leisure industry remains excellent.
Info Tech stayed an Unattractive sector. Software Services is the standout. The Semis look awful. The Communication Services sector is Unattractive.
Industrials are now Unattractive, and Materials are Very Unattractive. Utilities stay Very Unattractive. The Electric Power industry is the best at Market Weight.
(1) Energy stays the top sector, remaining firmly at Very Attractive. Top industries here are Oil Misc., Coal, Oil Drillers, and Oil & Gas Integrated.
Zacks #1 Rank (STRONG BUY): Halliburton (HAL - Free Report)
(2) Financials moved to Attractive from Very Attractive. Banks & Thrifts and Insurance remain the best. 2023 recession worry, and Fed rate hiking remains relevant.
Zacks #1 Rank (STRONG BUY): LPL Financial (LPLA - Free Report)
(3) Health Care stays a Market Weight. Medical Care looks relatively better.
Zacks #1 Rank (STRONG BUY): Medpace Holdings (MEDP - Free Report)
(4) Consumer Staples went to Market Weight from Very Attractive. Agri-business stood out.
(5) Info Tech stayed Unattractive. Computer Software-Services is the standout. Semis look terrible.
(6) Communications Services stays at Market Weight. Telco Equipment and Telco Services look about the same now. Market Weight for both.
(7) Industrials fell to Unattractive from Market Weight. Pollution control is the best. Metal Fabricating and Machinery are OK.
(8) Consumer Discretionary fell to Very Unattractive from Unattractive. Leisure Services looks the best. Nonfood Retail was solid.
(9) Materials fell to Very Unattractive from Unattractive. Building Products look the best, at market weight.
(10) Utilities stay Very Unattractive. Utilities-Electric Power look best.
III. Conclusion
Stock markets likely care less about any outcomes from the U.S. midterm elections.
Risk takers out there?
They mostly care about this political moment just being -- in the rear-view mirror.
Enjoy the rest of Zacks NOV strategy report.
Warm Regards,
John Blank
Zacks Chief Equity Strategist and Economist