The following is an excerpt from Zacks Chief Strategist John Blank’s full Dec Market Strategy report To access the full PDF, . click here I. Start with Investigating the Top 10 World ETFs on Zacks.com Across the last month, as the following Top 10 World ETF table shows, stock market returns have been strongly positive for ETFs holding solely ex U.S. stocks. As the 1-year Zacks ETF returns column shows, we have not seen that in a long time.
Image Source: Zacks Investment Research
Taking a snippet from Vanguard’s benchmark returns table (thru Oct. 31st, 2022), we have not seen substantial return from ex U.S. stocks -- in a really, really long time.
Image Source: Zacks Investment Research
Zacks DEC 2022 Market Strategy report intends to investigate.
This major ex U.S. stock-buying movement. II. A Global Markets Focus on Europe High consumer price inflation is global. In turn, a big drop in consumer confidence has been global. A chart (below) shows 12 European countries. Only bike-driven Netherlands consumer confidence has been holding up. Image Source: CEIC
Want to know more about what is going on in Europe. Now?
I have three fascinating facts to share, coming from the most recent publication of the
“Quarterly Report on European Electricity Markets.” (1) The European Union (E.U.) share of renewables managed to increase its share to 43%, outplaying fossil fuels (36%) during the second quarter of 2022.
Renewable generation improved its output by 2% (+5 TWh) year-on-year. This was the result of an increase of 24% in solar generation (+13 TWh), 10% of onshore wind (+7 TWh) and 11% of offshore wind (+1 TWh), despite hydro generation falling by 16% (-15 TWh) on yearly basis. Nuclear generation remained under pressure due to unplanned outages and scheduled maintenance in France, decreasing its output by 17% (-27 TWh) in Q2 2022.
(2) Retail electricity prices for household costumers in European Union capital cities were up by +54% in August 2022, compared with the same month in 2021.
Highest increases in E.U. Member States prices were registered in Italy and Estonia (+131%). The energy component share surpassed 50% of the total retail price in 20 E.U. capitals, up from 8 in Q2 2021.
Retail electricity prices for industrial customers also increased, estimated at +32% higher year-on-year in Q2 2022 for mid-sized industrial consumers.
Industrial retail electricity prices in the E.U. were higher compared to many trading partners, implying cost disadvantages, especially for energy intensive industries.
The increases in retail prices could continue ahead in the next heating season, as there is still room for wholesale prices to be passed through to consumer contracts.
(3) European Union demand for electrically charged vehicles (ECV) positioned Q2 2022 as the fourth highest quarterly figure on record.
Almost 440,000 new ECVs were registered in the E.U. in Q2 2022. However, sales registered a slight decrease during the second quarter of 2022 in comparison with Q2 2021(-1%).
E.U. proposals linked to Green Deal initiatives and national policies continue to support the adoption of ECVs in Europe. The E.U.’s
. Q2-22 ECV sales translated to a 19% market share, lower than China, but almost three times higher than in the USA
Finally, let’s incorporate the troubled macro stories in the United Kingdom and Russia.
Image Source: St Louis Fed
The latest NOV 2022 London consensus, on isolated Russia’s real GDP growth outlook:
The latest NOV 2022 consensus, on the self-isolated U.K. real GDP growth outlook:
Yes, folks. Those show a deep 2-year Russian collapse and a shallow U.K. recession.
For 2023, bolt on shallow Euro Area recessions in Germany (-0.9%), Austria (-0.2%), and Italy (-0.2%).
However, realize -- forward-looking equity traders look to a recovery.
Looking 12-18 months ahead means buying Euro Area large cap stocks now! III. Zacks December Sector/Industry/Company Telescope
Nearly all Q3 S&P 500 EPS reports were included now. This was the early DEC look…
Entering DEC, the Zacks Industry Ranks offer two Very Attractive sectors:
Energy was one.
Financials have now risen to a Very Attractive. Banks & Thrifts prospects keep rising with interest rates. Insurance looks great.
Now in the top third of sectors, Health Care rose to an Attractive sector.
Consumer Staples rose to an Attractive sector too. Agri-business is the standout there.
Industrials rose to Market Weight. Metal Fabricating, Machinery & Industrial Products stand out.
Utilities became just Unattractive. The Electric Power industry is the best at Market Weight.
Early December rankings show us four Very Unattractive groups. That is a lot of poor groupings.
In a Very Unattractive Consumer Discretionary sector, the Publishing industry was fine. Info Tech fell to a Very Unattractive sector. Software Services is the new big loser. The Semis look awful. The Communication Services sector became Very Unattractive. Materials are Very Unattractive. The Steel industry was best, at just a Market Weight.
(1) Energy stayed a top sector, remaining firmly at Very Attractive. Top industries here are Oil Misc., Oil Drillers, Coal, and Oil & Gas Integrated. Zacks #1 Rank (STRONG BUY) Stock: Helmerich & Payne ( HP Quick Quote HP - Free Report) (2) Financials moved up to Very Attractive from Attractive. Banks & Thrifts and Insurance remain the best. 2023 recession worry, and Fed rate hiking remains relevant. Zacks #1 Rank (STRONG BUY) Stock: Compass Diversified Holdings ( CODI Quick Quote CODI - Free Report) (3) Health Care rose to Attractive from Market Weight. Medical Care looks great now. Zacks #1 Rank (STRONG BUY) Stock: Innoviva ( INVA Quick Quote INVA - Free Report) (4) Consumer Staples went to Attractive from Market Weight. Agri-business stood out, again. (5) Industrials rose back to Market Weight from Unattractive. Metal Fabricating, Machinery, and Industrial Products/Services look the best. (6) Info Tech slid to Very Unattractive from Unattractive. Both Computer Software-Services and Semis look terrible now. (7) Communications Services slid to Very Unattractive from Market Weight. Telco Services look about Market Weight. Telco Equipment is the awful industry group here. (8) Consumer Discretionary stayed Very Unattractive. Publishing looks the best now. (9) Materials stayed Very Unattractive. Steel looks the best, at market weight. (10) Utilities became just Unattractive. Utilities-Telephone and Utility-Electric Power look OK. IV. Conclusion
That’s it for me.
Enjoy the rest of the Zacks DEC 2022 Market Strategy report.
Zacks Chief Equity Strategist and Economist