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The Return of the Risk-Chasers: Zacks DEC Market Strategy

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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. The Return of the Risk-Chasers

Remember when Cathie Wood’s ARK ETFs helped drive the Nasdaq to a Q1-21 peak? And then led the subsequent 2-year short-driven non-profitable stock trading plunge?

This December, her ‘Disruptive Innovation’ ETF share values became a fresh topic of interest.

To recap the recent ARK trading action: In early 2023, these ‘Disruptive Innovation’ ETFs started to rise. Then, across the middle section of 2023, that trading strength abated.

In December 2023, these ‘Disruptive Innovation’ ETFs are rallying notably, once again…

Zacks Investment Research
Image Source: Zacks Investment Research

Here is the forced ranking, based on Nov. 27th, 2023 ETF annualized returns—

1. ARKQ     Autonomous Technology and Robotics ETF
2. ARKW    Next Generation Internet ETF
3. ARKF     Fintech Innovation ETF
4. ARKK     ARK Innovation ETF
5. ARKG    Genomic Revolution ETF
6. ARKX     Space Exploration & Innovation ETF

ARKG (the biotech darlings) and ARKX (space and exploration) recovered the least.

For bulls, if these risky tech indices continue to rise, the Autonomous Technology & Robotics (ARKQ), Next Generation Internet (ARKW) could be the ETFs to target, for a sustained share price run.

The broad ‘Innovation’ ARKK fund and the Fintech Innovation ARKF ETF appear to be near the breakeven returns point now.

Perhaps just cherry-pick the stocks inside these portfolios, the ones that are moving up?

II. Zacks December Sector/Industry/Company Telescope

With no more earnings reports to bring earnings estimate revisions en masse, the Zacks Industry Rank statistics moved a number of S&P500 sectors toward Market Weights.

The sole Attractive top sector in DEC was Info Tech. The Mag 7 and AI help here.

This month, Energy and Utilities marked a Market weight rating. Also at Market Weight were Health Care, Financials and Communication Services. A very crowded center!

Unattractive sectors were Industrials and Consumer Staples.

At the bottom, Consumer Discretionary and Materials were stuck with Very Unattractive ratings.

(1) Info Tech moves to Attractive from Very Attractive. The Semi’s & Software Services groups led, once again here.

Zacks #1 Rank (STRONG BUY) Stock: Intel (INTC - Free Report)

(2) Energy fell to Market Weight from Very Attractive. Energy-Alternates and Oil/Gas Pipelines look best.

Zacks #1 Rank (STRONG BUY) Stock: The Williams Companies (WMB - Free Report)

(3) Utilities fell to Market Weight from Very Attractive. Utilities-Gas is tops, with winter on.

Zacks #1 Rank (STRONG BUY) Stock: Southwest Gas (SWX - Free Report)

(4) Health Care stayed Market Weight. Drugs lead.

(5) Financials stayed at Market Weight. Insurance looks great. That’s it.

(6) Communications Services rose to Market Weight from Unattractive.

(7) Industrials stayed at Unattractive. Business Products & Pollution Control stay strong.

(8) Consumer Staples stayed Unattractive from Attractive. Food/Drug Retail looked best, once again.

(9) Consumer Discretionary stayed Very Unattractive. But once again, in a contrary fashion, Non-food Retail and Leisure Services stayed strong.

(10) Materials fell to Very Unattractive from Unattractive. Building Products was best, at only Market Weight.

III. Conclusion

A recent 87 basis point fall in the risk-free long-term U.S. Treasury yield offered a breath of life to stock momentum-chasing speculators.

The price of Bitcoin (BTC) has gone from trading around $27K in mid-October to race over $43K in early December.

Call buying in iShares Russell 2000 small cap ETF (IWM - Free Report) has been absolutely surging, seeing record levels over the last month.

It remains to be seen if this is a brief rally for the most speculative instruments. Or one that is to be taken more seriously.

Enjoy the rest of the DEC Zacks Market Strategy report.

Happy Holidays!

John Blank
Zacks Chief Equity Strategist and Economist

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