'Green Shoots' from the Fed

Stocks fluctuated in volatile trading on Thursday morning, but were nearly flat at midday. Disney shares rose 7% after the company reported better-than-expected fiscal 4Q EPS and announced plans to cut an additional $2 billion in expenses. Disney and other content providers, including Netflix and Paramount, also benefited from a tentative agreement ending the Hollywood actors strike. On the employment front, first-time claims for state unemployment benefits fell by 3,000 to a seasonally adjusted 217,000 for the week ended November 4, slightly below the Reuters consensus forecast. The Dow was flat, the S&P rose 0.1%, and the Nasdaq rose 0.2%. Crude oil rose 1% to $76 per barrel, while gold traded near $1968 per ounce.

The Vickers Top Buyers & Sellers is a daily report that identifies the five companies the largest insider purchase transactions based on the dollar value of the transactions as well as the five companies the largest insider sales transactions based on the dollar value of the transactions.

When looking at insider-sentiment data from Vickers Stock Research over the past few weeks, the significant talking point has been Vickers' one-week sell/buy ratio for stocks that trade on the Nasdaq. While Vickers' other indicators generally were in keeping with historical standards during earnings season, the sell/buy ratio for the Nasdaq bearishly skyrocketed three weeks ago to 13.20 (on a scale where a reading above 2.50 is bearish). Last week, the ratio improved significantly, but at 7.51 was still uncomfortably high. This week, the ratio is 6.68 and again has improved but again has more wood to chop. But the trend is positive -- and that trend, along with other sentiment barometers that are of little concern, has resulted in a stabilization in overall insider sentiment.

Stocks and bonds rallied in April, and both asset classes are in positive territory year-to-date. Looking ahead, our Stock-Bond Barometer Model modestly favors bonds over stocks for long-term portfolios. In other words, these asset classes should be near their target weights in diversified portfolios, with a slight tilt toward fixed income, given the rise in yields since early 2022. We are now over-weight on large-caps. We favor large-caps for growth exposure and financial strength, while small-caps are selling at historical discounts relative to large-caps and offer value. Our recommended exposure to small- and mid-caps is now 12%-13% of equity allocation, below the benchmark weighting. U.S. stocks have outperformed global stocks over the trailing five-year period, though international stocks have performed well more recently. We expect the long-term trend favoring U.S. stocks to re-emerge, given volatile and erratic global economic, political, geopolitical, and currency conditions. That said, international stocks offer favorable near-term valuations, and we target 7%-8% of equity exposure to the group. Value outperformed in 2022 due to the negative impact of rising interest rates on growth valuations. As rates decline, growth stocks are recovering in early 2023. Over the longer term, we anticipate that growth, led by the Technology and Healthcare sectors, will top returns from value, led by the Energy and Basic Materials sectors, due to favorable secular, demographic and regulatory trends.

Several weeks ago, with insider-transaction volume at cyclical lows because of trading restrictions in place during earnings season, we noted more insider selling than buying. But we also noted that the majority of the selling was the result of prescheduled sales by insiders, and not 'spur of the moment' reactions to market developments.

The Vickers Top Buyers & Sellers is a daily report that identifies the five companies the largest insider purchase transactions based on the dollar value of the transactions as well as the five companies the largest insider sales transactions based on the dollar value of the transactions.

In recent commentary, we talked about one of the things missing from this potential new bull market -- namely, a lockout rally. Persistent strength is a common theme after 'the' low is in. In 1982, the 13-week rate-of-change (ROC) after the bottom was 37% and the S&P 500 (SPX) rose in 10 of those 13 weeks. Off the secondary low in early 1991, the 14W ROC was 22% with 10 of 14 weeks positive. In 1998, the 13W gain was 30% and the '500' rose in 10 of 13 weeks. After the technology meltdown, the 13W bounce off the 2003 low was 20%, with 10 of 13 weeks on the upside. After the financial crises, we witnessed a 38% rally in 2009, with the index rising in 11 of 13 weeks. Following the 2011 secondary low, the 16W rate-of-change was 22%, with advances in 13 of 16 weeks.

Stocks surged in October during the 3Q EPS season, but remain in a bear market for the year. Bond prices extended their slump during the month, and, as with stocks, remain lower year-to-date. Looking ahead, our Stock-Bond Barometer model modestly favors bonds over stocks for long-term portfolios. In other words, these asset classes should be near their target weights in diversified portfolios, with a slight tilt toward fixed income, given the recent rise in yields. We are now balanced on large- and small-caps. We favor large-caps for growth exposure and financial strength, while small-caps are selling at historical discounts relative to large-caps and offer value. Our recommended exposure to small- and mid-caps is 15%-17% of equity allocation, in line with the benchmark weighting. U.S. stocks have outperformed global stocks over the trailing one- and five-year periods. We expect this long-term trend to continue, given volatile and often difficult-to-predict global economic, political, geopolitical, and currency conditions. That said, international stocks offer favorable near-term valuations, and we target 5%-10% of equity exposure to the group. Value has taken the performance lead in 2022 due to the negative impact of rising interest rates on growth valuations. Over the longer term, we anticipate that growth, led by the Tech and Healthcare sectors, will top returns from value, led by the Energy and Materials sectors, due to favorable secular and demographic trends.

In the eight weeks before the start of earnings season, insider-sentiment data from Vickers Stock Research was consistently positive. On a scale where any reading below 2.00 is bullish, Vickers' Total One-Week Sell/Buy Ratio never got higher than 1.99 and was as low as 1.06. That resulted in a peak bullish Total Eight-Week Sell/Buy Ratio of 1.71 on October 15, just as the earnings onslaught began.

Stocks rose on Thursday morning after paring early losses. GDP data was weaker than expected. The Commerce Department reported that the U.S. economy contracted at a 0.9% annualized rate in 2Q, below the Bloomberg consensus, which had called for a gain of 0.4%. The second straight quarterly decline in GDP, after a 1.6% drop in 1Q, met a common definition of recession. The Dow rose 0.7%, the S&P 0.8%, and the Nasdaq 0.6%. Crude oil rose 1% to $98 per barrel, while gold fell 2% to $1752 per ounce.

Stocks rose on Thursday morning amid earnings reports from major technology companies and new GDP data. The Commerce Department said that the U.S. economy contracted at a 1.4% annualized rate in the first quarter, driven mainly by a wider trade deficit, down from 6.9% growth in 4Q and below the Reuters consensus forecast, which called for growth of 1.1%. The Dow rose 0.4%, the S&P 0.8%, and the Nasdaq 0.6%. Crude oil rose nearly 2% to $104 per barrel, while gold fell slightly to $1890 per ounce.

Current Correction Similar to Past Near-Bear Phases, not Classic Bear Markets

This edition features Broadridge's potential, trends in utility companies, new coverage of Datadog, and Eastman, Atlassian, and Comcast.

After reaching euphoric levels in first part of November, sentiment has quickly cooled following the recent price volatility. This is not one bit surprising as the major indices rapidly pulled back from all-time highs during the month of November.

Yesterday, we discussed issues that could lead to a market pullback, and today that event may be here. Of course, we have been looking for a pause in the uptrend for weeks now. On Wednesday, the S&P 500 lost 0.8%, the Nasdaq fell 1.7%, the Nasdaq 100 (QQQ) dipped 1.5%, the S&P MidCap 400 gave up 0.9%, and the Russell 2000 (IWM) dropped 1.6%. Not to worry, though, as major indices remain close to all-time highs.

Stocks finished mostly higher on Thursday as investors weighed a new round of earnings reports and continued to assess the Fed's tapering plan. Employment data was strong. The Labor Department said that first-time claims for state unemployment benefits fell to 269,000 for the week ended October 30, down from 283,000 a week earlier and below the Bloomberg consensus of 275,000. Continuing claims of 2.105 million were also down from the prior week and below consensus. The data came ahead of the government's October employment report on Friday morning. The consensus calls for the addition of 450,000 new payroll jobs after an increase of 194,000 in September, and a decrease in the unemployment rate to 4.7%. The Dow fell 0.09%, the S&P rose 0.42%, and the Nasdaq rose 0.81%. Crude oil fell 2% to $79 per barrel, while gold rose $29 to $1793 per ounce.

Stocks finished mostly higher on Thursday as investors weighed a new round of earnings reports and continued to assess the Fed's tapering plan. Employment data was strong. The Labor Department said that first-time claims for state unemployment benefits fell to 269,000 for the week ended October 30, down from 283,000 a week earlier and below the Bloomberg consensus of 275,000. Continuing claims of 2.105 million were also down from the prior week and below consensus. The data came ahead of the government's October employment report on Friday morning. The consensus calls for the addition of 450,000 new payroll jobs after an increase of 194,000 in September, and a decrease in the unemployment rate to 4.7%. The Dow fell 0.09%, the S&P rose 0.42%, and the Nasdaq rose 0.81%. Crude oil fell 2% to $79 per barrel, while gold rose $29 to $1793 per ounce.

In August, we said that a crude oil (WTI) breakout over $70 would complete a bullish inverse head-and-shoulders (H&S) pattern and open up several scenarios, with the most-common 100% extension targeting $78, or just above the highs from early July. With the strong gain of 2.3% on Monday, WTI hit an intraday high $78.38, and closed at $77.63.

Sentiment remains quite optimistic and, to date, it is hard to argue with that assessment when looking at shares prices. So far, liquidity has trumped most technical indicators -- and there certainly is a fair amount of historical precedent for that.

Stocks rose on Thursday, led by the Financial and Energy sectors, as investors weighed new employment data. First-time jobless claims fell to 385,000, down from 399,000 a week earlier but slightly above the consensus forecast. Continuing claims fell to 2.930 million, down from 3.296 million a week earlier and below the consensus forecast of 3.255 million. The continuing claims reading was the first below 3 million since March 2020. The data came ahead of the government's July employment report on Friday morning. The Bloomberg consensus calls for the addition of 865,000 new payroll jobs after an increase of 850,000 in June, and a slight decrease in the unemployment rate to 5.7%. The Dow rose 0.78%, the S&P 0.60%, and the Nasdaq 0.78%. Crude oil rose to $69 per barrel, while gold fell $8 to $1807 per ounce.

Many investors are beginning to focus their investment funds on companies that follow sustainable business practices and/or are addressing global impact issues. At Argus, we are a portfolio advisor to a Unit Investment Trust that is built around ESG criteria. We also have launched a separately managed account based on ESG and Impact investing principles. Two times a year, we screen our Universe of Coverage to highlight the stocks that score highest on ESG criteria. We note that Impact Investing addresses issues such as climate change, hunger, poverty, shelter, and clean water. Clean water is not only a personal issue; many industries, including oil, gas, semiconductors, chemicals, electric utilities, food products, beverages and metals and mining, are heavily reliant on clean water. According to the 2030 Water Resources Group, by 2030 "demand for water will be 40 percent higher than it is today, and more than 50 percent higher in the most rapidly developing countries. Historic rates of supply expansion and efficiency improvement will close only a fraction of this gap. Unless local, national and global communities come together and dramatically improve the way we envision and manage water, there will be many more hungry villages and degraded environments-and economic development itself will be put at risk in many countries." The companies in our list this week are working on systems and providing products to reduce global and domestic water risks.

Sustainable Impact investing continues to grow. According to Opimas, a management consultancy focused on global capital markets, global assets under management in ESG strategies grew to $40.5 trillion in 2020, doubling in four years and tripling in eight. As assets have flowed in, SRI investing has evolved over the past 40 years. Now, instead of merely identifying industries to avoid, the discipline promotes "sustainable" business practices across all businesses that can have an "impact" on global issues such as workers' rights, poverty, hunger, and the climate. Based on numerous requests from clients, we have compiled a portfolio of companies followed by Argus Research that are in position to have this type of "sustainable impact" on the environment, workplace, and community. These firms have exemplary records not only in delivering on the bottom line, but also in improving the environment, contributing to community relations, and showing respect for their employees. We built our portfolio by identifying companies that are BUY-rated by Argus analysts and also score well on ESG (Environmental, Social and Governance) criteria established by the JUST Capital Foundation. JUST Capital utilizes a combination of polling, data-driven research, and strategic engagement to shift behaviors and activities in corporate America and the financial markets. JUST Capital's mission is to drive measurable corporate change to create a stakeholder-centric, inclusive form of capitalism that reflects the priorities of the American public. JUST ranks the Russell 1000 on these criteria against a scale of 1-100. Here are company highlights from the Argus U.S. ESG Model Portfolio.

Stocks fell again on Tuesday on continued inflation fears. The yield on the 10-year Treasury rose to more than 1.62%. On the employment front, the Labor Department's Job Openings and Labor Turnover Survey (JOLTS) showed that U.S. job openings rose by 597,000 to a record 8.1 million as of March 31. The data again highlighted the tight labor market for companies seeking to fill jobs in a recovering economy, and the potential impact of government stimulus programs in limiting the supply of workers. The Dow fell 1.3%, the S&P 0.9%, and the Nasdaq 0.1%. Crude oil traded near $65 per barrel, while gold rose $1 to $1838 per ounce.

Sustainable Impact Investing is gaining traction with the global investment community. In January 2020, BlackRock CEO Lawrence Fink, who oversees approximately $9 trillion in assets, announced that his firm would be investing in companies that are making progress on sustainability. He doubled down in his January 2021 letter, calling on company managements to disclose their plans for making their businesses "compatible with a net-zero economy" by 2050. As assets have flowed in over the past 40 years, Sustainable Impact Investing has evolved. The discipline, originally known as Socially Responsible Investing, focused at first on excluding companies that conducted business in South Africa, or participated in industries such as tobacco, alcohol, and firearms. But the performance of these initial strategies lagged, and the approach has been modified. Now, instead of merely identifying industries to avoid, the discipline promotes "sustainable" business practices across all industries that can have an "impact" on global issues such as the climate, hunger, poverty, disease, shelter, and workers' rights.

Stocks were mixed on Friday morning after paring early losses, with gains in the Communication Services and Energy sectors and declines in Financials. On the earnings front, FedEx shares rose more than 6% after the company posted strong fiscal 3Q results and issued better-than-expected full-year EPS guidance. Nike shares fell 4% after the company missed the consensus sales forecast for fiscal 3Q. The Dow fell 0.5%, the S&P fell 0.1%, and the Nasdaq rose 0.6%. Crude oil traded near $60.50 per barrel, while gold rose $1 to $1734 per ounce.

There are now more than 80 million Millennials, born between 1982 and 2000 and ranging in age from their early 20s to their late-30s. This generation is the largest in history - bigger than even the Baby Boomers. Yet despite their size, and according to our research, Millennials currently account for 25% of total U.S income - some $3.1 trillion in direct annual purchasing power. Millennials are already coveted by marketers, even though their annual average income is 40% below the spending levels of the generation ahead of them (Gen X) and 30% below the spending levels of Baby Boomers, who are slowing down. But as Millennials rise into their peak earning years, their earnings are expected to grow.

As earnings season moves towards completion, the volume of insider transactions is returning to normal, lending increased significance to the proprietary sentiment indicators from Vickers Stock Research. For three consecutive weeks during the heart of earnings, insiders turned bearish in a manner that exceeded the norm for that time on the calendar. During the bearish turn, the DJIA moved from 28,586 (close on 10/12/20) down to 26,501 (close on 11/2/20). Insiders then became bullish -- and one week later, the DJIA was back up to 28,323 (close on 11/6/20). So what gives this week?

As earnings season moves towards completion, the volume of insider transactions is returning to normal, lending increased significance to the proprietary sentiment indicators from Vickers Stock Research. For three consecutive weeks during the heart of earnings, insiders turned bearish in a manner that exceeded the norm for that time on the calendar. During the bearish turn, the DJIA moved from 28,586 (close on 10/12/20) down to 26,501 (close on 11/2/20). Insiders then became bullish -- and one week later, the DJIA was back up to 28,323 (close on 11/6/20). So what gives this week?

Often overlooked amid the market's gyrations, dividend income is an important element of total return. Consider recent results: in 2015, the S&P 500 delivered a total return of 1.4%, including dividends -- but excluding dividends, the market was down 0.7%. Capital gains were a bit easier to achieve in 2016-17, though we note that dividend payments still contributed about 15%-20% of total return for investors. And dividend payments softened the blow in 2018, when most market indices declined as the Federal Reserve hiked rates. Between 1930 and 2012, dividend income accounted for 42% of total return of the S&P 500, according to Morgan Stanley. Not all dividends are created equal, though, and it is important to understand the difference between high-yield stocks and dividend-growth stocks, particularly in a slow-growth or recessionary economic environment.

Often overlooked amid the market's gyrations, dividend income is an important element of total return. Consider recent results: in 2015, the S&P 500 delivered a total return of 1.4%, including dividends -- but excluding dividends, the market was down 0.7%. Capital gains were a bit easier to achieve in 2016-17, though we note that dividend payments still contributed about 15%-20% of total return for investors. And dividend payments softened the blow in 2018, when most market indices declined as the Federal Reserve hiked rates. Between 1930 and 2012, dividend income accounted for 42% of total return of the S&P 500, according to Morgan Stanley. Not all dividends are created equal, though, and it is important to understand the difference between high-yield stocks and dividend-growth stocks, particularly in a slow-growth or recessionary economic environment.

This is among our most important themes for 2020, and stretches across industries. We think companies that raise their dividends consistently at a double-digit rate are delivering three important signals amid all the recent market volatility: 1) the company's balance sheet is strong enough to pay a dividend; 2) management is focused on providing shareholder returns; and 3) management is confident enough in the near-term outlook to raise the payout aggressively. This third factor is especially important as the pandemic upends the nation's recent record of long-term economic growth. Here are 13 stocks that meet our double-digit dividend test and are on the Argus BUY List. They are also new holdings in our Dividend Growth Separately Managed Account and in the Dividend Growers Total Return Trust, sponsored by SmartTrust.

This is among our most important themes for 2020, and stretches across industries. We think companies that raise their dividends consistently at a double-digit rate are delivering three important signals amid all the recent market volatility: 1) the company's balance sheet is strong enough to pay a dividend; 2) management is focused on providing shareholder returns; and 3) management is confident enough in the near-term outlook to raise the payout aggressively. This third factor is especially important as the pandemic upends the nation's recent record of long-term economic growth. Here are 13 stocks that meet our double-digit dividend test and are on the Argus BUY List. They are also new holdings in our Dividend Growth Separately Managed Account and in the Dividend Growers Total Return Trust, sponsored by SmartTrust.

Stocks were largely flat on Friday morning after paring early losses. Retail sales data disappointed: the Commerce Department said that U.S. retail sales rose just 1.2% July, below the Reuters consensus forecast of 1.9% growth and down sharply from 8.4% in June amid rising coronavirus cases and diminished unemployment benefits. The Dow and the S&P rose 0.1%, while the Nasdaq fell 0.1%. Crude oil fell slightly to $42 per barrel, while gold dropped $17 to $1954 per ounce.

Stocks were largely flat on Friday morning after paring early losses. Retail sales data disappointed: the Commerce Department said that U.S. retail sales rose just 1.2% July, below the Reuters consensus forecast of 1.9% growth and down sharply from 8.4% in June amid rising coronavirus cases and diminished unemployment benefits. The Dow and the S&P rose 0.1%, while the Nasdaq fell 0.1%. Crude oil fell slightly to $42 per barrel, while gold dropped $17 to $1954 per ounce.

Many investors are beginning to focus their investment funds on companies that follow sustainable business practices and/or are addressing global impact issues. At Argus, we are a portfolio advisor to a Unit Investment Trust that is built around ESG criteria. We also have launched a separately managed account based on ESG and Impact investing principles. Two times a year, we screen our Universe of Coverage to highlight the stocks that score highest on ESG criteria. We note that Impact Investing addresses issues such as climate change, hunger, poverty, shelter and clean water. Clean water is not only a personal issue; many industries, including oil, gas, semiconductors, chemicals, electric utilities, food products, beverages and metals and mining, are heavily reliant on clean water. According to the 2030 Water Resources Group, by 2030 "demand for water will be 40 percent higher than it is today, and more than 50 percent higher in the most rapidly developing countries. Historic rates of supply expansion and efficiency improvement will close only a fraction of this gap. Unless local, national and global communities come together and dramatically improve the way we envision and manage water, there will be many more hungry villages and degraded environments -- and economic development itself will be put at risk in many countries." The companies in our list this week are working on systems and providing products to reduce global and domestic water risks.

Many investors are beginning to focus their investment funds on companies that follow sustainable business practices and/or are addressing global impact issues. At Argus, we are a portfolio advisor to a Unit Investment Trust that is built around ESG criteria. We also have launched a separately managed account based on ESG and Impact investing principles. Two times a year, we screen our Universe of Coverage to highlight the stocks that score highest on ESG criteria. We note that Impact Investing addresses issues such as climate change, hunger, poverty, shelter and clean water. Clean water is not only a personal issue; many industries, including oil, gas, semiconductors, chemicals, electric utilities, food products, beverages and metals and mining, are heavily reliant on clean water. According to the 2030 Water Resources Group, by 2030 "demand for water will be 40 percent higher than it is today, and more than 50 percent higher in the most rapidly developing countries. Historic rates of supply expansion and efficiency improvement will close only a fraction of this gap. Unless local, national and global communities come together and dramatically improve the way we envision and manage water, there will be many more hungry villages and degraded environments -- and economic development itself will be put at risk in many countries." The companies in our list this week are working on systems and providing products to reduce global and domestic water risks.

This edition features utilities' dividend strength; cybersecurity trends; a fresh look at airlines; and notes from Netflix and new coverage DiaSorin and Central China New Life.