October 3, 2024 • 19 mins
What stocks should you buy? What sectors should you target? Ask 10 different experts and you might get 10 different answers. But Sam Stovall, Chief Investment Strategist at CFRA Research, likes to provide answers grounded in factual analysis, hard data, and historical patterns. And he joined me for an enlightening and actionable discussion on current market conditions and attractive investment opportunities for this MoneyShow MoneyMasters Podcast segment.
We start by discussing the three primary forces that drove markets higher in Q3...and that will continue to influence them in Q4. They include Chinese economic stimulus, fading inflation pressures, and a Federal Reserve that has already cut interest rates once and will continue to cut over the next several months. He next discusses the 2024 presidential election, including what recent market performance says about the two candidates’ chances to win in November – and how stocks typically perform in the first year of a new presidential administration. Our conversation then pivots to which sectors should show the strongest earnings growth in the coming 12 months...when (and when not) to consider rotating out of leaders and in to laggards...as well as what top stocks in sectors like healthcare, industrials, and utilities look particularly attractive based on CFRA’s methodology.
We start wrapping up by talking about what Sam expects the dollar, gold, and global stocks to do in the next few quarters, and what opportunities that will present to investors. Finally, he previews what he plans to discuss at the 2024 MoneyShow MoneyMasters Symposium Sarasota, scheduled for Dec. 5-7 at the Hyatt Regency Sarasota. Click here to register: https://sarasotamms.com/?scode=061246
We start by discussing the three primary forces that drove markets higher in Q3...and that will continue to influence them in Q4. They include Chinese economic stimulus, fading inflation pressures, and a Federal Reserve that has already cut interest rates once and will continue to cut over the next several months. He next discusses the 2024 presidential election, including what recent market performance says about the two candidates’ chances to win in November – and how stocks typically perform in the first year of a new presidential administration. Our conversation then pivots to which sectors should show the strongest earnings growth in the coming 12 months...when (and when not) to consider rotating out of leaders and in to laggards...as well as what top stocks in sectors like healthcare, industrials, and utilities look particularly attractive based on CFRA’s methodology.
We start wrapping up by talking about what Sam expects the dollar, gold, and global stocks to do in the next few quarters, and what opportunities that will present to investors. Finally, he previews what he plans to discuss at the 2024 MoneyShow MoneyMasters Symposium Sarasota, scheduled for Dec. 5-7 at the Hyatt Regency Sarasota. Click here to register: https://sarasotamms.com/?scode=061246
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:04):
What stocks should you buy? What sectors should you target?
Ask ten different experts and you might get ten different answers.
But today's guest on The Money Show Money Master's podcast
doesn't just share his opinions. His answers are grounded in fact,
our data, and historical research, and I can say from
personal experience he has been right time and time again.
Speaker 2 (00:23):
Plus his wit.
Speaker 1 (00:24):
And mastery of market puns is truly second to none,
which as a teller of dad jokes like.
Speaker 2 (00:29):
I am, I can fully appreciate.
Speaker 1 (00:31):
I'm Mike Larsen to your podcast host, and I'm pleased
to be sitting down with Sam Stoveall, chief investment strategist
at CFRA Research.
Speaker 2 (00:38):
Sam, Welcome to the show.
Speaker 3 (00:40):
Good to talk to you again.
Speaker 2 (00:41):
Mike, glad we could do this.
Speaker 1 (00:43):
You know, I know you've been in this business for
a long time and many of the people who are
watching this are probably familiar with your work. But just
in case, why don't you briefly summarize, summarize what sets
CFRA apart and what your focus on is Over there?
Speaker 3 (00:55):
Sure well. CFRA is an independent research for It started
out back in the mid nineties with a forensic accounting
operation started by Howard Shillett. Then as time went on,
CFRA purchased the S and P equity research side from
(01:16):
the Standard Impoors Corporation to add the wealth management by
Hold and Sell kind of research. We then added Lowry Associates,
which is a technical analysis firm, and then lastly Washington
Analysis which is a political strategy organization. So really trying
to offer independent research. You know, no acts to grind
(01:41):
et cetera. So we're not affiliated with other companies where
in a sense we have to say the right thing.
Speaker 1 (01:47):
Got it excellently and you know I will say I
may watching this, they do excellent work.
Speaker 2 (01:52):
Absolutely absolutely need check it out. Sam.
Speaker 1 (01:55):
I want to start, you know, by pointing out that
I remember doing one of these interviews with you from
the floor the Money Show Orlando Back and Fall of
twenty twenty three. We just gotten through a sort of
lousy period of the market, several down weeks, and you
said essentially not to worry. Your work suggested would see
a strong year end rally and potentially double digit gains
in twenty four. Needless to say, that's been right on target.
(02:16):
So I'm kind of looking for an update from you.
Where do things stand? Now given what's happened between then
and today.
Speaker 3 (02:22):
Well, you're absolutely right that what I like to do
is I like to start with history. I know that
history is a great guide. It's never gospel, but a
lot of times it does imply that the history might
end up rhyming, maybe not necessarily repeating itself. And yes,
early in twenty three, we had just come off a
near twenty percent decline, yet we had a positive January
(02:45):
barometer as popularized by the Stock Trader's Almanac. We also
had a Q one low that did not undercut the
prior December low. And whenever those factors were in place
a negative year, positive January and a QUEU one non undercut,
we ended up being higher by about twenty five percent
(03:05):
on average, with the frequency of gain being one hundred
percent of the time since World War Two. Obviously not
a guarantee, but it worked out in twenty twenty three
twenty twenty four. What we found is that it's an
election year, and again, if it starts out on the
right foot with a January gain, then the market was
higher one hundred percent of the time, with the average
(03:27):
increase being sixteen percent. So what we have found also
is that because we had such a strong first quarter,
it did imply that we had to fasten our safety
belts because it was the eleventh best first quarter since
World War Two. And of the top fifteen, fourteen of
them had a decline of five percent or more shortly thereafter,
(03:51):
and a majority of them had a second intra year
decline of five percent or more. And that's exactly what
we got.
Speaker 2 (03:58):
Got it, got it? Well?
Speaker 1 (04:00):
You know in a recent piece you did in the Outlook,
the weekly newsletter that you guys publish, he said three
main things are propelling this market, and that was China
stimulus more recently easing in US inflation readings, and of
course the Fed's ability to react.
Speaker 2 (04:13):
To that by cutting interest rates.
Speaker 1 (04:15):
How do you see those drivers unfolding in the last
quarter here of twenty four and as we kind of
roll the calendar into twenty five.
Speaker 3 (04:22):
Well, I think twenty twenty four is going to end
on a positive note. I have a twelve month target
of sixty one forty five, which equates to fifty eight
sixty as a final read for twenty twenty four. I
think that now with us having three months left, even
(04:42):
though October could end up seeing an awful lot of volatility.
It is the most volatile month of the year and
actually has thirty four percent more volatility than the average
of the other eleven months of the year. But barring
that volatility, I think we're going to end up they
positive November and December, as we historically have during election years.
(05:06):
I also think that you have a lot of portfolio
managers who are still behind the curve right now and
want to make sure that they keep their jobs and
earn their bonuses, and so as a result, they're probably
going to put the pedal to the metal and therefore
end up with a positive end of year return.
Speaker 1 (05:26):
Understood, Vacation real estate isn't getting any cheaper after all, right,
in any event, so if we talk about some of
these drivers, I mean, the FED, obviously we've gotten the
fifty basis point cut. We're kind of looking most likely
at a couple more for the end of the year
and maybe into early twenty five. Any thoughts on that
and sort of how that's going to impact the sector
rotation and the sectors that you think are prime to
(05:47):
perform the best.
Speaker 3 (05:49):
Sure, well, the FED started its rate cutting program in September,
and leading up to that I had been warning investors
that it's more profitable wanting it is having. What I
mean by that is, on the average twelve month period
between the last rate hike and the first rate cut,
the market gained, the market being S and P five
(06:11):
hundred advanced by an average of about eighteen percent. Yet
in the first month after the cut, we ended up
seeing the market tread water. Yes, you did have more
action beneath the surface, but also as much as three
and six months down the road, you had mid to
low single digit price appreciation. And of the six rate
(06:35):
cutting cycles since nineteen ninety and I go back to
then because that was when the Fed started informing us
of changes to the Fed funds rate. Prior to that,
they only told us of discount rate moves. But since
nineteen ninety four, of those six times we ended up
falling into a bear market and a recession within a
(06:57):
seven month period. So, yes, this time could be different
from the majority, But I think investors do have to
worry a little bit about what is likely to occur
in twenty twenty five because October twelfth we do celebrate
the second anniversary of this bull market, and typically the
third years are very challenging.
Speaker 2 (07:18):
Understood.
Speaker 1 (07:19):
Understood, Let me also ask I guess, then, against what
your historical work shows about presidential election years and the
year after the election, when you have the new administration
come in, how does that factor into your outlook for
twenty five as well? Sure?
Speaker 3 (07:33):
Well, what's interesting is that the July thirty one through
October thirty one performance has been a very good indicator
as to who will be elected, and market advance traditionally
has pointed to the incumbent being re elected incumbent person
or party, whereas a market decline indicated that the incumbent
(07:56):
would be replaced. And right now the SMP is up
more than three and a half percent, So the implication
is that we would likely see the Democrats get re
elected to the White House. Some people have said, well,
wait a minute, but how didn't the rate cut help
the current administration? And what's interesting is that there have
(08:18):
been eight times since World War Two in which we
had either a rate hike or a rate cut in
that July through October period, and only twice out of
those eight times could you say that it assisted the incumbent.
The other times really had no effect on the outcome
of the election. So my first thought is, you know,
(08:40):
don't think that there was politics played by the Fed.
In terms of the first year of the presidential cycle,
the market does fairly well, up nine point two percent
on average, rising in price about two out of every
three times, sort of leapfrogs. We have an anemic first
and third quarter, but a pretty healthy second and fourth quarter,
(09:03):
so ended up being a fairly good year. Certainly early
on you have that honeymoon period, and our expectation is
will likely see that as well.
Speaker 1 (09:15):
When we talk again, going back a year, some of
the sectors that you thought would show the best Earnie's
growth in twenty four were things like communications services, consumer
discretionary technology, and industrials. How have things changed since then,
if they have indeed changed at all, Well.
Speaker 3 (09:30):
There's an old adage you let your winners ride. Frequently
in the beginning of each year, somebody says to me, Sam,
what should I do? Should I buy last year's winners
or last year's losers, And the answer is that depends.
If you are following a down year, you actually want
to buy last year's losers because more times than not,
(09:52):
investors will rotate back into them in order to ride
the wave. Higher, because rarely have we had two successive
years of negative performance in the overall market. Again, twenty
twenty three was a great example. What you do is
you buy the prior year's worse three performers, and they
(10:12):
tend to be outperformers in the second year when we
have a positive year. However, you do want to let
your winners ride. So communications services, consumer discretionary information technology
were the better performers in twenty twenty three, and certainly
two out of those three are doing quite well this year.
(10:33):
We're starting to see consumer discretionary inch up again, but
it did end up going through a bit of a
challenging period. When I look to twenty twenty five earnings,
essentially all but four of the eleven sectors are expected
to post double digit gains, with the market itself being
fourteen percent, and the strongest earnings are likely to come
(10:55):
from healthcare, believe it or not, on a bit of
a rebound from its naming only twenty four estimated increase,
as well as information technology of about twenty one percent.
So tech, even though it is training a bit lofty
in terms of valuations, a lot of analysts and investors
are going to be focusing more on twenty twenty six
(11:16):
versus twenty twenty five, and there we see a seventeen
percent advance, which is the highest of all eleven sectors.
Speaker 1 (11:26):
What about a couple of these sectors that really had
been in the doghouse for some time and are now
trying to find their way out. I mean, real estate
is one that jumps out, of course, given what's happened
to the FED.
Speaker 2 (11:36):
Utilities obviously have been a very strong performing group for
several months now.
Speaker 3 (11:40):
Thoughts on those, Well, you're right that those two groups
you just mentioned were beneficiaries because of the expectation that
the FED would be cutting interest rates and also feeling
that the worst is behind them, and certainly in terms
of real estate. In terms of utilities, what we've also
found is that a lot of these utilities are going
(12:01):
to be powering the need for AI, data storage, etc.
So several of the companies in that index have been
the sole drivers of that sector's performance. What I did
in anticipation of today's conversation was match up fundamentals with technicals.
As I mentioned, CFRA does have its one hundred plus
(12:26):
fundamental equity analysts, but at the same time, our Lowry
Research group. Our Technical analysis ARM also comes up with
what's called power ratings. So by combining the fundamentals with
the technicals, I essentially came up with a list of
stocks that look good on both fronts. I like to
(12:48):
say that fundamentals tell you what, but technicals tell you
when and how far. And groups that had not been
out performers but are starting to perk up, in particular healthcare,
so companies like Boston Scientific, HCA Healthcare, and Striker Corporation
have favorable technicals and fundamentals. Industrials companies like three m GE,
(13:14):
Northrope Grumming obviously because of the concerns about the tensions
in the Middle East, and then also Entergy Corp in utilities,
so several names that at least in the near term
we think will do fairly well.
Speaker 2 (13:29):
Wonderful.
Speaker 1 (13:29):
I appreciate you sharing some ideas there for people to
look into. I guess I would say it seems like
when I look at things like your top ten model
portfolio that you guys put out too, it's a fairly
broad mix. I mean, it's financials, it's tech, it's materials.
Does that speak somewhat to the breadth of this advance
that it's not just a mag seven market anymore.
Speaker 3 (13:50):
Well, you're absolutely right. When we do have ideas such
as the high quality capital appreciation are power Picks portfolio,
et cetera. We really try to satisfy the needs of
the investor. You know, we've got thousands of people who
sign on to our market Scope advisor platform and want
(14:12):
to be offered guidance. So some of them are more
aggressive and they want growth ideas. Others want mid and
small cap opportunities which might not be followed very closely
by other analysts on the street, whereas some are saying, no,
I just want the income. One of my portfolios is
the Industry Momentum Portfolio, so a bit based on James
(14:37):
O'Shaughnessy's book What Works on Wall Street, where you take
a look at the rolling fifty two week well out
of strength and you let your winners ride. What it
does is it buys those that are in the top
ten percent and then holds them until they fall out
of the top thirty percent. So whatever the investors need,
we try to satisfy with one of these portfolios.
Speaker 1 (14:59):
Wonderful any thoughts as we get towards the tail end
of the conversation on some other asset classes or the
big picture thinking out their interest rates, gold, the US dollar,
maybe how that might alternate the outperformance that we've seen
in US stocks versus foreign markets.
Speaker 3 (15:15):
Absolutely well. We do think that the US dollar is
likely to weaken remainder of this year and into twenty
twenty five, primarily because the FED will be cutting rates
we think twice more this year, by twenty five basis
points each and then four quarterly rate reductions next year
by twenty five basis points. So as a result, the
(15:39):
interest rates that one could earn in the US will
be less attractive relative to other areas, So the dollar
could be weakening. That would be beneficial to gold. Certainly,
gold right now is doing well because of the flight
to safety, because of the tensions around the globe, but
also because of the value of the dollar. Tends to
(16:02):
come down and therefore it is a dollar denominated asset
and it becomes more affordable for those who want to
buy it. At the same time, I think that if
you look to international investments, I had mentioned earlier that
valuations could be a bit stiff for some areas. The
SMP is currently trading at a thirty seven percent premium
(16:24):
to its long term average forward PE ratio. However, mid
and small cap stocks are trading at thirty percent discounts
each to its relative PE relative to the S and
P five hundred, and developed and emerging markets are also
trading a double digit discounts. So if you're looking for opportunities,
(16:46):
as we Willie Keeler once said, you hit him where
they ain't, and right now they ain't really in mid
small and international investments.
Speaker 1 (16:55):
Excellent, Sam, You're going to be joining us for the
twenty twenty four Money Show Master Symposium in Sarasota this December.
Speaker 2 (17:01):
I know we're still a few months away.
Speaker 1 (17:03):
Any kind of sneak peek at what you think you
might talk about or what somebody who attends one of
your sessions is going to take away from it.
Speaker 3 (17:08):
Sure, well, I'm gonna First off, I very much enjoy
being a part of the money shows, and Sarasota is
good because we have family in the area, so I
get to visit family and do work at the same time.
But focusing on twenty twenty five, talking about how traditionally
(17:28):
the third year of bull markets, we've had eleven bull
markets that entered their third year. Three of them ended
up failing to reach their end of their third year,
two more posted double digit declines but not enough to
be called bear markets, and then three additional bull markets
(17:49):
had below average price appreciation. So I think it could
end up being a bit of a tricky year. So
I will be discussing those sectors sub industry that we
happen to like and what kind of volatility we're like
to experience in the year ahead.
Speaker 2 (18:07):
Excellent, Sam, Thank you so much for your insights. I
appreciate you joining me here.
Speaker 1 (18:11):
Viewers, If you're watching this and you'd like to learn
more from Sam, he's going to be speaking again at
the Money Show Master Symposium that goes December fifth to
seventh of the Higatt Regency, Sarasota.
Speaker 2 (18:21):
There'll be a link in.
Speaker 1 (18:22):
The description below you can check out for more details
and to register. And again, don't forget to like these
videos and subscribe if you want to get updates whenever
we post a new one. Sam, thanks again for your
time and I appreciate you appreciate this.
Speaker 2 (18:33):
Look forward to seeing you soon.
Speaker 3 (18:34):
My pleasure to look forward to it again. Bye.
Speaker 1 (18:37):
We'll have more interviews for you every week, so I
encourage you to subscribe to the Money Master's podcast so
you can stay up to date with the insights from
top money experts. You can follow me on Twitter at
real Mike Larson and follow money Show for more investing
and trading content on Twitter, Instagram, and YouTube at money Show.
Thanks for listening, See you next time.
What stocks should you buy? What sectors should you target?
Ask ten different experts and you might get ten different answers.
But today's guest on The Money Show Money Master's podcast
doesn't just share his opinions. His answers are grounded in fact,
our data, and historical research, and I can say from
personal experience he has been right time and time again.
Speaker 2 (00:23):
Plus his wit.
Speaker 1 (00:24):
And mastery of market puns is truly second to none,
which as a teller of dad jokes like.
Speaker 2 (00:29):
I am, I can fully appreciate.
Speaker 1 (00:31):
I'm Mike Larsen to your podcast host, and I'm pleased
to be sitting down with Sam Stoveall, chief investment strategist
at CFRA Research.
Speaker 2 (00:38):
Sam, Welcome to the show.
Speaker 3 (00:40):
Good to talk to you again.
Speaker 2 (00:41):
Mike, glad we could do this.
Speaker 1 (00:43):
You know, I know you've been in this business for
a long time and many of the people who are
watching this are probably familiar with your work. But just
in case, why don't you briefly summarize, summarize what sets
CFRA apart and what your focus on is Over there?
Speaker 3 (00:55):
Sure well. CFRA is an independent research for It started
out back in the mid nineties with a forensic accounting
operation started by Howard Shillett. Then as time went on,
CFRA purchased the S and P equity research side from
(01:16):
the Standard Impoors Corporation to add the wealth management by
Hold and Sell kind of research. We then added Lowry Associates,
which is a technical analysis firm, and then lastly Washington
Analysis which is a political strategy organization. So really trying
to offer independent research. You know, no acts to grind
(01:41):
et cetera. So we're not affiliated with other companies where
in a sense we have to say the right thing.
Speaker 1 (01:47):
Got it excellently and you know I will say I
may watching this, they do excellent work.
Speaker 2 (01:52):
Absolutely absolutely need check it out. Sam.
Speaker 1 (01:55):
I want to start, you know, by pointing out that
I remember doing one of these interviews with you from
the floor the Money Show Orlando Back and Fall of
twenty twenty three. We just gotten through a sort of
lousy period of the market, several down weeks, and you
said essentially not to worry. Your work suggested would see
a strong year end rally and potentially double digit gains
in twenty four. Needless to say, that's been right on target.
(02:16):
So I'm kind of looking for an update from you.
Where do things stand? Now given what's happened between then
and today.
Speaker 3 (02:22):
Well, you're absolutely right that what I like to do
is I like to start with history. I know that
history is a great guide. It's never gospel, but a
lot of times it does imply that the history might
end up rhyming, maybe not necessarily repeating itself. And yes,
early in twenty three, we had just come off a
near twenty percent decline, yet we had a positive January
(02:45):
barometer as popularized by the Stock Trader's Almanac. We also
had a Q one low that did not undercut the
prior December low. And whenever those factors were in place
a negative year, positive January and a QUEU one non undercut,
we ended up being higher by about twenty five percent
(03:05):
on average, with the frequency of gain being one hundred
percent of the time since World War Two. Obviously not
a guarantee, but it worked out in twenty twenty three
twenty twenty four. What we found is that it's an
election year, and again, if it starts out on the
right foot with a January gain, then the market was
higher one hundred percent of the time, with the average
(03:27):
increase being sixteen percent. So what we have found also
is that because we had such a strong first quarter,
it did imply that we had to fasten our safety
belts because it was the eleventh best first quarter since
World War Two. And of the top fifteen, fourteen of
them had a decline of five percent or more shortly thereafter,
(03:51):
and a majority of them had a second intra year
decline of five percent or more. And that's exactly what
we got.
Speaker 2 (03:58):
Got it, got it? Well?
Speaker 1 (04:00):
You know in a recent piece you did in the Outlook,
the weekly newsletter that you guys publish, he said three
main things are propelling this market, and that was China
stimulus more recently easing in US inflation readings, and of
course the Fed's ability to react.
Speaker 2 (04:13):
To that by cutting interest rates.
Speaker 1 (04:15):
How do you see those drivers unfolding in the last
quarter here of twenty four and as we kind of
roll the calendar into twenty five.
Speaker 3 (04:22):
Well, I think twenty twenty four is going to end
on a positive note. I have a twelve month target
of sixty one forty five, which equates to fifty eight
sixty as a final read for twenty twenty four. I
think that now with us having three months left, even
(04:42):
though October could end up seeing an awful lot of volatility.
It is the most volatile month of the year and
actually has thirty four percent more volatility than the average
of the other eleven months of the year. But barring
that volatility, I think we're going to end up they
positive November and December, as we historically have during election years.
(05:06):
I also think that you have a lot of portfolio
managers who are still behind the curve right now and
want to make sure that they keep their jobs and
earn their bonuses, and so as a result, they're probably
going to put the pedal to the metal and therefore
end up with a positive end of year return.
Speaker 1 (05:26):
Understood, Vacation real estate isn't getting any cheaper after all, right,
in any event, so if we talk about some of
these drivers, I mean, the FED, obviously we've gotten the
fifty basis point cut. We're kind of looking most likely
at a couple more for the end of the year
and maybe into early twenty five. Any thoughts on that
and sort of how that's going to impact the sector
rotation and the sectors that you think are prime to
(05:47):
perform the best.
Speaker 3 (05:49):
Sure, well, the FED started its rate cutting program in September,
and leading up to that I had been warning investors
that it's more profitable wanting it is having. What I
mean by that is, on the average twelve month period
between the last rate hike and the first rate cut,
the market gained, the market being S and P five
(06:11):
hundred advanced by an average of about eighteen percent. Yet
in the first month after the cut, we ended up
seeing the market tread water. Yes, you did have more
action beneath the surface, but also as much as three
and six months down the road, you had mid to
low single digit price appreciation. And of the six rate
(06:35):
cutting cycles since nineteen ninety and I go back to
then because that was when the Fed started informing us
of changes to the Fed funds rate. Prior to that,
they only told us of discount rate moves. But since
nineteen ninety four, of those six times we ended up
falling into a bear market and a recession within a
(06:57):
seven month period. So, yes, this time could be different
from the majority, But I think investors do have to
worry a little bit about what is likely to occur
in twenty twenty five because October twelfth we do celebrate
the second anniversary of this bull market, and typically the
third years are very challenging.
Speaker 2 (07:18):
Understood.
Speaker 1 (07:19):
Understood, Let me also ask I guess, then, against what
your historical work shows about presidential election years and the
year after the election, when you have the new administration
come in, how does that factor into your outlook for
twenty five as well? Sure?
Speaker 3 (07:33):
Well, what's interesting is that the July thirty one through
October thirty one performance has been a very good indicator
as to who will be elected, and market advance traditionally
has pointed to the incumbent being re elected incumbent person
or party, whereas a market decline indicated that the incumbent
(07:56):
would be replaced. And right now the SMP is up
more than three and a half percent, So the implication
is that we would likely see the Democrats get re
elected to the White House. Some people have said, well,
wait a minute, but how didn't the rate cut help
the current administration? And what's interesting is that there have
(08:18):
been eight times since World War Two in which we
had either a rate hike or a rate cut in
that July through October period, and only twice out of
those eight times could you say that it assisted the incumbent.
The other times really had no effect on the outcome
of the election. So my first thought is, you know,
(08:40):
don't think that there was politics played by the Fed.
In terms of the first year of the presidential cycle,
the market does fairly well, up nine point two percent
on average, rising in price about two out of every
three times, sort of leapfrogs. We have an anemic first
and third quarter, but a pretty healthy second and fourth quarter,
(09:03):
so ended up being a fairly good year. Certainly early
on you have that honeymoon period, and our expectation is
will likely see that as well.
Speaker 1 (09:15):
When we talk again, going back a year, some of
the sectors that you thought would show the best Earnie's
growth in twenty four were things like communications services, consumer
discretionary technology, and industrials. How have things changed since then,
if they have indeed changed at all, Well.
Speaker 3 (09:30):
There's an old adage you let your winners ride. Frequently
in the beginning of each year, somebody says to me, Sam,
what should I do? Should I buy last year's winners
or last year's losers, And the answer is that depends.
If you are following a down year, you actually want
to buy last year's losers because more times than not,
(09:52):
investors will rotate back into them in order to ride
the wave. Higher, because rarely have we had two successive
years of negative performance in the overall market. Again, twenty
twenty three was a great example. What you do is
you buy the prior year's worse three performers, and they
(10:12):
tend to be outperformers in the second year when we
have a positive year. However, you do want to let
your winners ride. So communications services, consumer discretionary information technology
were the better performers in twenty twenty three, and certainly
two out of those three are doing quite well this year.
(10:33):
We're starting to see consumer discretionary inch up again, but
it did end up going through a bit of a
challenging period. When I look to twenty twenty five earnings,
essentially all but four of the eleven sectors are expected
to post double digit gains, with the market itself being
fourteen percent, and the strongest earnings are likely to come
(10:55):
from healthcare, believe it or not, on a bit of
a rebound from its naming only twenty four estimated increase,
as well as information technology of about twenty one percent.
So tech, even though it is training a bit lofty
in terms of valuations, a lot of analysts and investors
are going to be focusing more on twenty twenty six
(11:16):
versus twenty twenty five, and there we see a seventeen
percent advance, which is the highest of all eleven sectors.
Speaker 1 (11:26):
What about a couple of these sectors that really had
been in the doghouse for some time and are now
trying to find their way out. I mean, real estate
is one that jumps out, of course, given what's happened
to the FED.
Speaker 2 (11:36):
Utilities obviously have been a very strong performing group for
several months now.
Speaker 3 (11:40):
Thoughts on those, Well, you're right that those two groups
you just mentioned were beneficiaries because of the expectation that
the FED would be cutting interest rates and also feeling
that the worst is behind them, and certainly in terms
of real estate. In terms of utilities, what we've also
found is that a lot of these utilities are going
(12:01):
to be powering the need for AI, data storage, etc.
So several of the companies in that index have been
the sole drivers of that sector's performance. What I did
in anticipation of today's conversation was match up fundamentals with technicals.
As I mentioned, CFRA does have its one hundred plus
(12:26):
fundamental equity analysts, but at the same time, our Lowry
Research group. Our Technical analysis ARM also comes up with
what's called power ratings. So by combining the fundamentals with
the technicals, I essentially came up with a list of
stocks that look good on both fronts. I like to
(12:48):
say that fundamentals tell you what, but technicals tell you
when and how far. And groups that had not been
out performers but are starting to perk up, in particular healthcare,
so companies like Boston Scientific, HCA Healthcare, and Striker Corporation
have favorable technicals and fundamentals. Industrials companies like three m GE,
(13:14):
Northrope Grumming obviously because of the concerns about the tensions
in the Middle East, and then also Entergy Corp in utilities,
so several names that at least in the near term
we think will do fairly well.
Speaker 2 (13:29):
Wonderful.
Speaker 1 (13:29):
I appreciate you sharing some ideas there for people to
look into. I guess I would say it seems like
when I look at things like your top ten model
portfolio that you guys put out too, it's a fairly
broad mix. I mean, it's financials, it's tech, it's materials.
Does that speak somewhat to the breadth of this advance
that it's not just a mag seven market anymore.
Speaker 3 (13:50):
Well, you're absolutely right. When we do have ideas such
as the high quality capital appreciation are power Picks portfolio,
et cetera. We really try to satisfy the needs of
the investor. You know, we've got thousands of people who
sign on to our market Scope advisor platform and want
(14:12):
to be offered guidance. So some of them are more
aggressive and they want growth ideas. Others want mid and
small cap opportunities which might not be followed very closely
by other analysts on the street, whereas some are saying, no,
I just want the income. One of my portfolios is
the Industry Momentum Portfolio, so a bit based on James
(14:37):
O'Shaughnessy's book What Works on Wall Street, where you take
a look at the rolling fifty two week well out
of strength and you let your winners ride. What it
does is it buys those that are in the top
ten percent and then holds them until they fall out
of the top thirty percent. So whatever the investors need,
we try to satisfy with one of these portfolios.
Speaker 1 (14:59):
Wonderful any thoughts as we get towards the tail end
of the conversation on some other asset classes or the
big picture thinking out their interest rates, gold, the US dollar,
maybe how that might alternate the outperformance that we've seen
in US stocks versus foreign markets.
Speaker 3 (15:15):
Absolutely well. We do think that the US dollar is
likely to weaken remainder of this year and into twenty
twenty five, primarily because the FED will be cutting rates
we think twice more this year, by twenty five basis
points each and then four quarterly rate reductions next year
by twenty five basis points. So as a result, the
(15:39):
interest rates that one could earn in the US will
be less attractive relative to other areas, So the dollar
could be weakening. That would be beneficial to gold. Certainly,
gold right now is doing well because of the flight
to safety, because of the tensions around the globe, but
also because of the value of the dollar. Tends to
(16:02):
come down and therefore it is a dollar denominated asset
and it becomes more affordable for those who want to
buy it. At the same time, I think that if
you look to international investments, I had mentioned earlier that
valuations could be a bit stiff for some areas. The
SMP is currently trading at a thirty seven percent premium
(16:24):
to its long term average forward PE ratio. However, mid
and small cap stocks are trading at thirty percent discounts
each to its relative PE relative to the S and
P five hundred, and developed and emerging markets are also
trading a double digit discounts. So if you're looking for opportunities,
(16:46):
as we Willie Keeler once said, you hit him where
they ain't, and right now they ain't really in mid
small and international investments.
Speaker 1 (16:55):
Excellent, Sam, You're going to be joining us for the
twenty twenty four Money Show Master Symposium in Sarasota this December.
Speaker 2 (17:01):
I know we're still a few months away.
Speaker 1 (17:03):
Any kind of sneak peek at what you think you
might talk about or what somebody who attends one of
your sessions is going to take away from it.
Speaker 3 (17:08):
Sure, well, I'm gonna First off, I very much enjoy
being a part of the money shows, and Sarasota is
good because we have family in the area, so I
get to visit family and do work at the same time.
But focusing on twenty twenty five, talking about how traditionally
(17:28):
the third year of bull markets, we've had eleven bull
markets that entered their third year. Three of them ended
up failing to reach their end of their third year,
two more posted double digit declines but not enough to
be called bear markets, and then three additional bull markets
(17:49):
had below average price appreciation. So I think it could
end up being a bit of a tricky year. So
I will be discussing those sectors sub industry that we
happen to like and what kind of volatility we're like
to experience in the year ahead.
Speaker 2 (18:07):
Excellent, Sam, Thank you so much for your insights. I
appreciate you joining me here.
Speaker 1 (18:11):
Viewers, If you're watching this and you'd like to learn
more from Sam, he's going to be speaking again at
the Money Show Master Symposium that goes December fifth to
seventh of the Higatt Regency, Sarasota.
Speaker 2 (18:21):
There'll be a link in.
Speaker 1 (18:22):
The description below you can check out for more details
and to register. And again, don't forget to like these
videos and subscribe if you want to get updates whenever
we post a new one. Sam, thanks again for your
time and I appreciate you appreciate this.
Speaker 2 (18:33):
Look forward to seeing you soon.
Speaker 3 (18:34):
My pleasure to look forward to it again. Bye.
Speaker 1 (18:37):
We'll have more interviews for you every week, so I
encourage you to subscribe to the Money Master's podcast so
you can stay up to date with the insights from
top money experts. You can follow me on Twitter at
real Mike Larson and follow money Show for more investing
and trading content on Twitter, Instagram, and YouTube at money Show.
Thanks for listening, See you next time.
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