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What's Alive for 2024 Pessimists? Zacks SEPT Market Strategy

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The following is an excerpt from Zacks Chief Strategist John Blank’s full Sep Market Strategy report To access the full PDF, click here.


I. Is it time to buy U.S. stocks in early September 2023?  

The S&P500 trades at 4,465.

An 18.8 forward P/E offers you no price value.

But 2024 and 2025 show S&P500 double-digit EPS growth. Earnings can deliver fundamental lift. Growth optimism must be matched by ‘real’ data.

II. What’s Alive for 2024 Pessimists?

Don’t ignore the financialization of Fed thinking.

Federal debt accumulation and money printing had reached unprecedented levels.

After swift Fed Funds rate hikes, the U.S. Housing market cooling (in a curious way) and a higher 10-year U.S. Treasury yield, consider the following updates.

  • New Single-Family Home Sales at 714K in July are above the 629K median
  • Median Sales Price of Houses Sold are down sharply at -7.39%
  • Houses for Sales – Months’ Supply at Current Sales Rate rose to 7.4 months in July. The median is 5.8 months
  • New Privately-Owned Housing Units built at 1442K, above median at 1354K

U.S. Housing Dashboard (1960 to July 2023)

Zacks Investment Research
Image Source: Zacks Investment Research

From here, if a Fed Funds rate hike-driven stock and (huge) housing price bubble pops even more, worries would dramatically increase about financial losses reeling out of office and retail America, into the banks.

Loan losses can beat up share and housing markets badly. The shorts have beaten up office REITs. A rise in fears (founded and unfounded) would lead to a deeper U.S. share pullback.

III. Zacks September Sector/Industry/Company Telescope

There is much sector change to discuss. This is a stock market that may be poised for a change in leadership.

The top sectors are now Industrials, Utilities, Info Tech, and parts of Financials.

The middles sectors are now where the Consumer Discretionary and Consumer Staples groups fell to. Health Care is here too.

The bottom sectors are Energy and Materials.

(1) Industrials stayed Very Attractive. Business Products, Machinery Electrical, lndustrial Products-Services, and Construction-Building Services are tops. Lots to pick from…

Zacks #1 Rank (STRONG BUY): Ingersoll Rand (IR - Free Report)

(2) Utilities rise to Very Attractive from Market Weight. Utilities-Telephone looks best.

Zacks #1 Rank (STRONG BUY): RWE AG (RWEOY - Free Report)

(3) Info Tech stayed Attractive. Semis remain notable at Very Attractive!

Zacks #1 Rank (STRONG BUY): ON Semiconductor (ON - Free Report)

(4) Financials rise to Attractive from Very Unattractive. Banks-Major and Finance led the way back.

(5) Communications Services rose to Attractive from Unattractive. Telco Equipment is best.

(6) Health Care stayed Market Weight. Medical Care led.

(7) Consumer Discretionary went down to Market Weight from Very Attractive. Non-food Retail and Leisure Services are tops.

(8) Consumer Staples went down to Market Weight from Very Attractive. Food/Drug Retail, Soaps & Cosmetics, and Beverages remained the best, though.

(9) Energy stays at Market Weight. Energy-Alternates look best.

(10) Materials fall to Very Unattractive from Market Weight. Building Products was best.

IV. Conclusion

Don’t lose sight of the Bear Case, in the face of this momentum trading Bull market in 2023.

Prudence augers for highlighting the Bear Case, now and again.

  • Bubbles of euphoria can deflate dramatically and without warning, after a much higher Fed Funds rate crushes the CPI data down, more and more.
  • More COVID mutations show up.

Bears see an added -10% to -30% downside, with spreading deep growth negatives.

This could also be due to an unforeseen swath of corporate bankruptcies and loan and stock margin losses.

There is large downside risk to lots of stock and home prices.

Those plays are available to shorts.

There are negative side effects to money printing too. Income inequality is growing.

But don’t get carried away with any Bear narrative. The Bulls are still in control.

Enjoy the rest of the Zacks SEPT 2023 Market Strategy report.

Warm Regards,

John Blank

Zacks Chief Equity Strategist and Economist

See More Zacks Research for These Tickers

Normally $25 each - click below to receive one report FREE:

Ingersoll Rand Inc. (IR) - free report >>

Invesco QQQ (QQQ) - free report >>

ON Semiconductor Corporation (ON) - free report >>

RWE AG (RWEOY) - free report >>

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