Is "Muddle Through" Policy Really Over? - Analyst Blog


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The following is an excerpt from John Blank's complete Zacks July Market Strategy . To access the full PDF, please click here .

With Federal payrolls above +200K five months in a row, the U.S. economy is gaining momentum.  Building on that theme, June activity showed us +288K jobs.  

In light of that, July stock markets show us surprising laggards and fresh leaders. Consumer stocks are in the back seat in July -- across the board.  Fresh-faced winning picks can be found in Energy, Utilities and Info Tech.

This set of positive outlooks speaks to fundamental resurgence in global GDP growth and non-U.S. revenue growth.  This also means international stocks should be getting a harder look too. IT and Energy are heavily non-U.S. in revenue growth.

Zacks View on Stocks in July

Our tactical sense of stock market timing is tied primarily to valuations.

This market's valuations have been ignored.  Bearish sages rightly keep pointing at them from time to time. Still other bearish sages may point at a rising 10-year U.S. Treasury rate or any return of volatility seen in stocks in 2H.  

Bullish sages think there is more space for the cycle to run.  

A Fed Statement on Skills

"Available data and anecdotal evidence indicate that selected worker groups with advanced, specialized technical skills have been seeing relatively rapid wage gains. However, for skilled workers overall, there is little evidence of a pickup in wage inflation. More generally, wage inflation has been especially limited for low-skilled workers."
-  San Fran Fed

Zacks Sector/Industry/Company Telescope in July

Leading the way in Zacks Industry Ranks was the Energy, Utility and Info Tech sectors in July.  Resurgent Electric Utilities and Oil E&P industries still look good.  Semiconductors are the best industry across the board in July.

(1) Energy is upgraded to Very Attractive in July.  Take a look into companies operating in Oil Misc., Oil & Gas Integrated and Oil E&P.  

Company to look at:  Conoco Phillips ( COP )

(2) Utilities stay Very Attractive in July, as in June.  The big bets are in Water Supply and Electric Power.

Company to look at:  Black Hills Corp. ( BKH )

(3) Info Tech stays a Very Attractive sector.  The best bets are in Semiconductors.  It is the leading Zacks Rank industry in July across the board.

Company to look at:  Vishay Intertechnology ( VSH )

(4) Industrials are upgraded to Attractive. The industries that look good:  Aerospace & Defense, Railroads, Airlines, Metal Fabricating, and Business Services.

(5) Health Care is Market Weight.  Medical Care and Drugs industry are the best bets.

(6) Financials are Market Weight.  The Finance and Insurance industries are the best bets

(7) Materials are Unattractive.  The Container & Glass industry is the best bet.  Stay away from Chemicals and Paper.

(8) Consumer Discretionary is also Very Unattractive now.  Market performers in Apparel and Media looks as good as it gets here.   Misc. Consumer Disc. has some good things going on too.

(9) Consumer Staples is a firm Very Unattractive sector.  No industry looks good.  In particular, stay away from Food/Drug Retail, Soaps & Cosmetics, and Misc. Staples.

(10) Telco's are Very Unattractive.  Stay away from Telco Services in particular.

This is an excerpt from John Blank's complete Zacks July Market Strategy . To access the full PDF, please click here .

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

CONOCOPHILLIPS (COP): Free Stock Analysis Report

VISHAY INTERTEC (VSH): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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