BY Scott Martindale,
As we get into the heart of earnings season and anticipate the GDP report for Q1, the investor spotlight has been taken off the Federal Reserve and timing of its first interest rate hike, at least temporarily. Even though Q1 economic growth will undoubtedly look weak, the future remains bright for the U.S economy (even though many multinationals will struggle with top-line growth due to the strong dollar) and any near-term selloff resulting from weak economic or earnings news should be bought yet again in expectation of better results for the balance of the year. Small caps should continue to benefit. High sector correlations remain a concern, reflecting herd-like risk-on/risk-off behavior rather than thoughtful stock-picking. From a technical standpoint, once again, the S&P 500 found reliable support at the lower uptrend line of the long-standing bullish rising channel, and only time will tell as to whether the latest bounce will lead to a challenge of the February highs. Overall, this week's fundamentals-based Outlook rankings have taken a slightly defensive tone, given the move in Utilities and Consumer Goods (Staples/Noncyclical), and the fall in Industrial. Our trend-following sector rotation model has returned to a bullish bias and suggests holding Healthcare, Financial, and Technology. Also discussed are some alternative highly-ranked ETFs and individual stock ideas from within the top-ranked sectors, and what the model suggests if you prefer a neutral or defensive outlook.
BY Scott Martindale,
In the ongoing bad-news-is-good-news saga, last week's surprisingly weak jobs report led to speculation that the Fed would delay hiking interest rates, which is perceived as a positive for equity investors. So, bulls are getting a boost for the moment, although those previously hard-won round-number price levels for the major indexes are now serving as ominous overhead resistance that will likely require a strong new catalyst to break through. Whether stocks are destined for downside or upside from here, Q1 earnings season starts this week and will likely provide the catalyst. Notably, the earnings bar has been lowered considerably. From a technical standpoint, stock are struggling in neutral territory and seeking a direction, and my inclination is that we will see another continuation to the upside.. Overall, this week's fundamentals-based Outlook rankings still look mostly bullish to me, with the top four (and six of the top seven) economically-sensitive or all-weather. Our trend-following sector rotation model retains a neutral bias and suggests holding Healthcare, Technology, and Financial sectors. Also discussed are some alternative highly-ranked ETFs and individual stock ideas from within the top-ranked sectors, and what the model suggests if you prefer a neutral or defensive outlook.
StyleMap® depictions of characteristics are produced by Fidelity using data from Morningstar, Inc. StyleMaps estimate characteristics of a fund's equity holdings over two dimensions: market capitalization and valuation. The percentage of fund assets represented by these holdings is indicated beside each StyleMap. Current StyleMap characteristics are denoted with a dot and are updated periodically. Historical StyleMap characteristics are calculated for the shorter of either the past three years or the life of the fund, and are represented by the shading of the box(es) previously occupied by the dot. StyleMap characteristics represent an approximate profile of the fund's equity holdings (e.g., domestic stocks, foreign stocks, and American Depositary Receipts), are based on historical data, and are not predictive of the fund's future investments. Although the data are gathered from reliable sources, accuracy and completeness cannot be guaranteed.