The following is an excerpt from John Blank’s full November Market Strategy. To view the full PDF, click here.
The U.S. Could Choose a Woman President
The 2016 online election forecast I follow has Clinton winning odds at 66% as I write. Most of you will read this and know the final voting result. With a historic run for the White House by a woman, I want to focus on the long 65-year march of women into the active labor force.
U.S. Bureau of Labor statistics show the build (below). In 1950, 32% of working age women worked outside the home, earning cash incomes. That number peaked at 60% in the year 2000. Today, it is near 56%. A downturn in women’s labor force participation came in the 2008 crisis. I find that more than interesting.
As the U.S. economy struggles to get more than +2% annual growth out of this business cycle, I think one underlying force holding U.S. growth back is the attrition of women in the active labor force.
Once women left the office for raising small children at home, in 2008, many never came back. They might have been forced by poor circumstances to do that, at first, but now the trend is established, and friends and neighbors have followed suit.
The lower presence of 2 cash incomes in households restrains final demand, and hence GDP growth.
Past Presidential Election Cycles
Another issue I would like to raise this month -- a prediction past Presidential election cycles makes for U.S. stock downturns and recessions.
The Philadelphia Fed Survey of Professional Forecasters has a 10% chance of a recession in Q1-2017 turn into a 20% chance by the end of 2017.
In data from 1945 to 2004 provided by Pepperdine Graziadio School of Business Review,
- 3 of 16 bear market lows occurred in year 1 of a Presidential term,
- 12 bear markets hit in year two,
- One hit in year three, and
- None happened in year four (the election year).
Keep the above in mind. The implication-- a bear market may well hit in 2018.
Finally, Jim O’Sullivan is the respected Chief Economist at High Frequency Economics. He tweeted out this graph, showing your party affiliation matters, to how good you feel about a Presidential cycle.
In the current election moment, Democrats, not surprisingly --with Obama in the Presidency-- feel better than Republicans.
Zacks NOV Sector/Industry/Company Telescope
The latest Zacks Industry Ranks show a changing of the guard. Leaders are the fallen sectors of day’s past --Materials, Energy and Financials.
- Rises in WTI oil prices and industrial commodity prices help generally. The turn to optimism on China growth is apparent.
- Also, the looming rate hike is showing up -- ratcheting of earnings estimates on the Banks, along with better EPS performance from Real Estate and other investment vehicles.
Semiconductors stay hot again this month. Aerospace & Defense looks good.
The big noted loser is the Drugs industries. The potential for a President Clinton is showing up here.
(1) Energy rises to Very Attractive. Tops are Coal, followed by Drillers, Pipelines, and the E&P guys. These industries had to bounce some time. The outlook of rising prices is arriving in EPS estimates.
Zacks #1 (STRONG BUY) Company: Alliance Holdings
Alliance Holdings GP, L.P., through its subsidiaries, produces and markets coal primarily to utilities and industrial users in the United States. It produces a range of steam coal with varying sulfur and heat contents.
(2) Materials rise to Very Attractive. The boost to China manufacturing PMIs showed up in estimates here. The leader is Metals-Non Ferrous (very China driven) and Paper and Steel (China driven too). Chemicals looks good too.
Zacks #2 (BUY) Company: Fortescue Metal (FSUGY - Free Report)
Fortescue Metals Group Ltd is engaged in the exploration and mining of iron ore properties. Its properties primarily include the Cloudbreak and Christmas Creek mine sites and the Solomon project located in Pilbara, Western Australia.
(3) Financials rise to Very Attractive. The leader is Investment Banking & Brokering. The Investment Funds, Real Estate, and Banks & Thrifts look good too. The looming rate hike is getting priced into EPS.
Zacks #2 (BUY) Company: Bank of NY Mellon (BK - Free Report)
(4) Info Tech stays Attractive. Once again—it is the semiconductors.
(5) Health Care falls to Market Weight. The Drug industries are weighing down the other 2 niches, Medical Care and Medical Products.
(6) Consumer Discretionary falls to Market Weight. The leader is Consumer Electronics and Publishing and Other Consumer Discretionary. The big losers are Media and Home Furnishings-Appliances.
(7) Industrials are Market Weight. The leader is Pollution Control, followed by Metal Fabricating, Aerospace & Defense, and Industrial Products-Services. The big loser is the Airlines, with stiff pricing competition going on, cutting into EPS estimates.
(8) Utilities are Market Weight. The best niche is Water Supply.
(9) Consumer Staples falls to Unattractive this month. Big losers are Soaps & Cosmetics, Agri-Business, and Misc. Staples. No industry above Market.
(10) Telcos fall to Very Unattractive. The Utility-Telephone industry got killed. The looming Fed rate hikes are hurting EPS here.
This is an excerpt from John Blank’s full November Market Strategy. To view the full PDF, click here.