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Less Virus, Better Share Returns: Zacks July Strategy Report

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

Given the huge amount of U.S. and global central bank easing, it should be no surprise.

Non-U.S. stocks are now moving up across the board!  

84 central banks have cut rates in 2020, by far the easiest monetary policy the world has ever seen.

Check out the following chart I built on June 29th using Investing.com global indices data…

 

China, Taiwan, South Korea (the KOSPI) are notably strong. Ditto Denmark (OMX) and New Zealand (DJ New Zealand).

There are actually 2 non-U.S. share indexes, Vietnam, known as the Hanoi30 (HNX 30) and the mainland China Shenzen Composite (SZSE), which have even outperformed the Nasdaq YTD.

This share returns YTD table for the globe shows that getting coronavirus under control pays.

Zacks July Sector/Industry/Company Telescope

The Zacks Industry Rank setup to the end of June appears truly noteworthy. Spend time on this section. It shows the huge effects of the non-U.S. countrywide re-openings.

Materials and the Energy sectors lead. When is the last time that happened? It has been years ago. Communication Services and Health Care are the leading domestic sectors now. The Info tech sector fell to Attractive, but the critical Semi industry is leading again. That another signal of the leadership coming from the non-US world. Semis have the most global supply chain of all. As the U.S. economy gets more hamstrung by rising virus counts, this is the new pattern.

Finally, CEOs are remaining very cautious. The Industrials remain at the very back of the pack. Holding off on Cap-ex until after the election and with a vaccine on the way will be their plan.

(1) Materials rose hugely, to Very Attractive from Very Unattractive. Steel, Metals Non-ferrous (the gold miners) and Building Products/Construction Materials are on fire, after shutdowns ended.

Thor Industries (THO - Free Report) : Thor Industries manufactures a wide range of recreational vehicles (RVs) at various manufacturing facilities located in Indiana and Ohio and sold through independent dealers in the U.S. and Canada.

(2) Energy rose to Attractive from Very Unattractive. Oil & Gas Pipelines and Oil & Gas Integrated looked the best.

PBF Logistics (PBFX - Free Report) : This $607 million market cap pipeline stock that offers a 12.23% annual dividend.

The company engages in owning, leasing, operating, developing and acquiring crude oil and refined petroleum products terminals, pipelines, storage facilities and similar logistics assets.

PBF Logistics LP is headquartered in Parsippany, New Jersey.

(3) Communications Services rose to Attractive from Very Unattractive. Utility-Telephone and Telco Equipment look good.

Calix (CALX - Free Report) : This is a $840 million market cap telco stock, with a Zacks A for Growth.

Innovative communications service providers rely on Calix platforms to help them master and monetize the complex infrastructure between their subscribers and the cloud. Calix is the leading global provider of the cloud and software platforms, systems, and services required to deliver the unified access network and smart premises of tomorrow.

Our platforms and services help our customers build next generation networks by embracing a DevOps operating model, optimize the subscriber experience by leveraging big data analytics and turn the complexity of the smart, connected home and business into new revenue streams.

(4) Health Care stayed Attractive. Drugs led again. But all three groups are solid.

(5) Utilities fell to Attractive from Very Attractive. Utilities-Gas Distribution still looks best, with summer here. Electric Power is now Market Weight.

(6) Info Tech fell to Attractive from Very Attractive. There has been a change in leadership. Semis lead now. Computer- Software Services 2nd. Telco Equip 3rd.

(7) Consumer Staples rose to Market Weight from Unattractive. However, Cons. Products Misc. Staples remained the sole strong industry group.

(8) Financials stayed Unattractive. Investment Banking & Brokering was a sole winner.

(9) Consumer Discretionary stayed at Very Unattractive. The Other Consumer Discretionary and Non-Food Retail remain the best groups. Lots of mediocre groups.

(10) Industrials remained Very Unattractive. The turn in cap-ex is not showing up yet. Construction Building-Services is the sole bullish exception.

That’s it for this month’s Zacks market strategy report.

Hopefully, the knowledge that a country’s virus caseload is tied to that country’s share returns will catch the attention of more individual share buyers.

This global pandemic going to be with us — whether we like it or not — for the rest of 2020.

At the least.

Regards,

John Blank
Zacks Chief Equity Strategist


In-Depth Zacks Research for the Tickers Above


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Thor Industries, Inc. (THO) - free report >>

PBF Logistics LP (PBFX) - free report >>

Calix, Inc (CALX) - free report >>