*Performance since 7/1/2022. For more details on the performance calculation and methodology of Alpha Picks, click here. |
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*Performance since 7/1/2022. For more details on the performance calculation and methodology of Alpha Picks, click here. |
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► Major indices experienced mixed movement this week as September consumer inflation came in hotter than expected. The Nasdaq, S&P 500, and Dow were all down early on Thursday following the report.
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► Hurricane Milton hit the Gulf Coast of Florida, prompting over 1M residents to evacuate just days after Hurricane Helene's impacts decimated the Southeastern United States; insurance losses could cost insurers up to $100B.
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► Oil prices advanced Thursday amid Middle East tensions. Gold, defense, and energy markets have traded higher, with Brent (CO1:COM) rising above $77 a barrel and West Texas Intermediate (CL1:COM) approaching $74 a barrel.
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► A historic Big Tech anti-trust case threatens to break up Alphabet, with Google units like Chrome browser and Android splitting from the company as solutions.
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► Crypto.com filed suit against the SEC to protect the future of crypto, citing the Commission's unauthorized and unjust regulation and enforcement of the industry.
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► U.S. Treasuries turned positive again amid election uncertainty, CPI, and jobs data, with the benchmark 10-year yield above 4%.
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The U.S. CPI report became a focal point this week, with a projected modest increase of 0.1% for September. This data is crucial in guiding the Federal Reserve's monetary policy, particularly under the current economic circumstances marked by cooling inflation trends. September inflation topped expectations, with Headline CPI increasing 2.4% year-over-year. Shelter experienced a 0.2% M/M increase vs. +0.5% in August; food climbed 0.4% vs. August's +0.1%. Collectively, the two indexes contributed over 75% of the monthly all-items increase, with energy sliding 1.9% M/M. The market closely watched for indications in the report that could signal future rate moves by the Fed, amid broader expectations that interest rate cuts might continue, albeit at a slower pace than anticipated earlier. Economic indicators, including wage growth and employment figures, further add layers to this dynamic, needing careful interpretation by market analysts. The September CPI report remains broadly disinflationary, as highlighted by Seeking Alpha Analyst Damir Tokic:
"This was a troubling inflation report because shelter rose by only 0.2%, and yet, the core CPI increased by 0.3% M/M, which was higher than expected…Given the strong labor market report, and two consecutive 0.30% core CPI prints, the Fed is likely to pause the easing campaign in November, which is not good news for the stock market." |
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According to the FedWatch tool, traders anticipate a 25 basis-point cut in November with an 89.1% probability. Persistent tensions in the Middle East moved oil prices higher to offset a two-day decline this week. The markets are watching Israel's potential response to missile attacks that prompted a rally in gold, defense, and energy markets. Brent (CO1:COM) rose above $77 a barrel, and West Texas Intermediate (CL1:COM) approached $74 a barrel. Further escalations that could impact supply chains could reignite inflation concerns.
Markets are constantly influenced by global economic and geopolitical events. If you're looking for a tool that simplifies stock picking by analyzing financial data to highlight stocks with the strongest investment fundamentals, Alpha Picks offers a more efficient approach to smarter investing. This service leverages Seeking Alpha's powerful quantitative stock-picking system, delivering two data-driven stock picks each month, helping investors save time and focus on high-quality opportunities. |
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Geopolitical tensions have been notably influenced by the ongoing unrest in the Middle East and the economic impact of recent natural disasters. The situation in Israel has caused ripple effects through global markets, impacting various sectors and investor sentiments. As the conflict continues to unfold, the potential for its escalation poses risks not only to regional stability but also to global supply chains and oil prices. These developments have heightened volatility within energy markets as investors closely monitor geopolitical shifts that may affect asset valuations and sector performance. |
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iShares China Large-Cap ETF (FXI) sees second-worst trading session since 2020 |
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Source Link: TradingView, Seeking Alpha |
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Chinese stocks extended their rally this week, despite Chinese large-caps experiencing their second-worst trading session since 2020 on Tuesday, citing a lack of stimulus measures from the Chinese government to revive the economy. Equity markets in Asia-Pacific countries led single-country performance in the last four weeks, with optimism tricking into Hong Kong markets. |
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Over The Last 4 Weeks, China's Equity Market Rallied
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Hurricane Milton hit the Gulf Coast of Florida, prompting over 1M residents to evacuate just days after Hurricane Helene's impacts decimated the Southeastern United States. Milton, which reached Category 5 status and had vast destructive potential, has disrupted operations across multiple industries, prompting mass evacuations and significant economic implications. Projections estimate that Hurricane Milton could lead to over $100 billion in economic losses, with its impact touching about 2.8% of the U.S. GDP. Airlines canceled flights, and companies paused their operations to mitigate risks. Sectors such as tourism, energy, and retail braced for substantial financial impacts, with Orlando and Tampa airports shutting down operations. Disney and other major attractions preemptively closed and fuel supply chains were strained, highlighting the widespread repercussions of the natural disaster. |
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This week, technology experienced a comeback ahead of Q3 earnings, with tech, energy, and communications sectors leading the markets over the last month. The AI-frenzy and semiconductors have paved the way for a surge in tech stocks; software companies are also experiencing high growth. |
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Technology is the best-performing sector over the last month
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During the week, Financials and Energy sectors showed mixed resilience, driven in part by anticipated economic adjustments and volatile global conditions. Despite a modest rebound in oil prices fueled by geopolitical tensions in the Middle East and the promise of economic stimulus from China, the Energy sector displayed strength amidst a volatile market landscape. Companies within this sector, like ConocoPhillips (COP) and Devon Energy (DVN), have benefitted from shifting supply and demand dynamics, showcasing strong profitability and growth potential with seven consecutive sessions of gains. |
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Seeking Alpha's Quant ratings have highlighted strong buy recommendations for several top energy stocks, further underscoring the sector's robust performance. The energy sector was buoyed by strategic investments and China's renewed economic undertakings, while excitement over upcoming earnings reports injected momentum into Financials.
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Despite Large-Cap Growth (IWF) outperforming Large-Cap Value (IWD) over the last week and month, traders have considered a potential shift from growth to value stocks. As growth stocks continue to grapple with heightened optimism and hefty valuations, with many positioned in the technology sector, we've experienced some rotation. The ongoing pressures from antitrust scrutiny and uncertain demand for tech hardware further weigh on the growth outlook. Consequently, market sentiment appears increasingly favorable toward value stocks as investors navigate the cautious landscape, particularly in the current macroeconomic context that features elevated growth stock valuations. |
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Over the last month, Large-Cap Growth outperformed Large-Cap Value |
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Dividend-yielding securities like Manulife Financial (MFC) and Synchrony Financial (SYF) gained attention as investors moved toward safer harbor investments, cautiously balancing yield and risk. Largely driven by the prospects of economic slowdown and high valuations of growth equities, the current market environment has set the stage for a potential rotation from growth stocks to value stocks, as investors look for stable returns amidst uncertainty. This move is supported by expectations of declining interest rates, which typically bolster value stocks by enhancing their relative appeal compared to growth stocks with elevated PE ratios. Notably, economic forecasts indicating a deceleration in GDP growth and climbing recession odds, as projected by financial institutions like JPMorgan, reinforce this outlook. The dividends and stability offered by value stocks become particularly attractive in such an environment.
In conclusion, the outlook for value stocks seems more promising given the current macro backdrop, characterized by towering growth stock valuations and a broadening preference for dividends and stability. This perspective gains additional traction when considering the moderating economic forecasts and potential shifts in monetary policy supporting a rotation toward value equities. |
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Bitcoin experienced a brief rally above $64,000 on Monday following a robust Jobs Report. The crypto sector has faced pressures from tightened U.S. regulatory scrutiny and fluctuations due to Middle East conflicts affecting overall market positioning. Crypto markets have been under considerable strain due partly to recent legal challenges and notable developments, as Crypto.com filed a lawsuit against the U.S. Securities and Exchange Commission ((SEC)) citing the Commission's unauthorized and unjust regulation and enforcement of the industry. This litigation follows a Wells notice indicating the SEC's intent to sue the exchange for operating as an unregistered broker-dealer. Crypto.com's litigation highlights ongoing tensions between regulatory bodies and digital asset platforms, reflecting broader industry scrutiny, including previous actions against entities like Kraken and Coinbase. |
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Cryptocurrencies Update: Markets Focus on Soft Jobless Claims, UofM Sentiment |
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These regulatory challenges pose significant headwinds for the crypto market by increasing uncertainty and possibly discouraging institutional and retail participation. As the market grapples with these regulatory confrontations, Bitcoin's resilience remains tested. The increased pressure from legal obstacles exacerbates existing volatility linked to geopolitical tensions. These factors contribute to a challenging landscape for cryptocurrencies, which are already sensitive to shifts in regulatory policies and global economic stability.
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The U.S. dollar maintained strength, with the Bloomberg Dollar Spot Index rising. Increased Treasury yields and foreign investment flows supported this momentum, though the pound and euro weakened against the dollar due to differing central bank policies. |
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In the current market landscape, the Japanese yen continued to face depreciation pressures, losing 0.6% against the dollar. Geopolitical tensions and global economic conditions influenced investor sentiment, contributing to the yen's decline. Heightened yields on U.S. Treasuries further exacerbated this trend, making the dollar a more attractive safe haven.
Meanwhile, Chinese currencies have remained under pressure due to skepticism surrounding Beijing's stimulus measures. The mood was sobered further by weaker-than-expected consumer activity during the Golden Week holiday, casting a shadow on China's broader economic rebound efforts. This has contributed to complex dynamics in currency exchanges, impacting the Chinese yuan and necessitating careful monitoring by investors. |
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Chart of the Week - What's Behind the Inflation Report?
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September's U.S. CPI report likely added more uncertainty about the Federal Reserve's stance on interest rate cuts through next year. The headline and core gauge beat economists' expectations by 0.1 percentage points, notching 2.4% and 3.3% on an annual basis, respectively.
The label values represent September 2024 in the chart below. The energy component of inflation was -6.8% y/y, contributing to the headline print falling well below the core gauge, which strips out volatile components to reflect underlying price pressures.
The largest contributor to CPI - shelter - clocked in at 4.9% y/y, down from 7.2% one year ago. There were notable gains in medical care services and electricity, rising to 3.6% and 3.7% from -2.6% and 2.6% versus 1 year ago, respectively. |
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What is Alpha Picks? Global economic and geopolitical events are key drivers of market fluctuations, influencing stock prices, investor sentiment, and broader financial trends. These forces often cause market volatility as investors respond to both short-term risks and long-term growth opportunities. Understanding these shifts is essential, as global events can quickly alter market conditions, affecting sectors and individual stocks. Alpha Picks is a data-driven model that offers Strong Buy-rated stocks believed to have the highest probability of capital appreciation based on a proprietary quantitative model. Two 'Strong Buy' rated stocks are selected monthly on the first trading day of the month and the 15th or the closest trading day thereafter. Alpha Picks' portfolio has delivered an incredible total return of 149% vs. the S&P 500's 53% since its launch on July 1, 2022. Eight out of 36 Alpha Picks have returned over 100% to the portfolio. In addition, 33 out of 36 Alpha Picks met or beat recent EPS earnings expectations. Historically, Alpha Picks has maintained both revenue and earnings growth rates that are far superior to the S&P 500. |
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Alpha Picks Outpaces S&P 500 In Revenue Growth
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The Alpha Picks portfolio valuation framework is far cheaper than the S&P 500, helping investors potentially achieve stronger growth at a discount. Alpha Picks' 11.75% forward revenue growth from February 2023 through August 2024 is outperforming the S&P 500's 6.67%.
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Alpha Picks Offers A Significantly Cheaper Valuation than the S&P 500 |
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Alpha Picks' quantitative-driven approach has resulted in the selection of stocks like Super Micro Computer (SMCI), which at the time of its pick in 2022 was trading for $8.53 per share. SMCI currently trades for over $45 per share and has traded as high as $122.90 per share! While past performance is no guarantee of future results, Alpha Picks' four most recent additions have returned between 4% and over 30%.
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► FOMC: The Fed is unlikely to lower rates by another half a percentage point (0.5%) amid the strong September Jobs Report. While a 'substantial majority' favored a large cut in September, FOMC Meeting Minutes revealed some pushback by officials. The Fed remains confident that inflation is on a sustainable path toward their 2% target, and the majority of officials prefer a more gradual pace for cuts.
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► Inflation: The U.S. has moderated in recent months, with CPI seeing a slight 0.2% uptick from August. With a strong labor market and two straight 0.30% core CPI prints, the Fed may pause its easing campaign next month.
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► U.S. jobs report: Despite the devastation of hurricanes and worker strikes that have disrupted companies and workplaces, the strong September Jobs Report exceeded economists' expectations. The U.S. added 254,000 nonfarm jobs in September, its biggest month for job growth since March, topping estimates by 100,000 and creating optimism about the labor market's health before the U.S. Presidential Election.
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| Pearson plc (PSO)
OPEC Monthly Report |
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| UnitedHealth Group Inc. (UNH)
Johnson & Johnson (JNJ) |
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| Morgan Stanley (MS)
U.S. Bancorp (USB)
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| Netflix, Inc. (NFLX)
Taiwan Semiconductor Manufacturing Company Limited (TSM) |
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| The Proctor & Gamble Co. (PG)
American Express Co. (AXP)
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*Performance is as of October 11, 2024. Alpha Picks adds two stocks per month - on the closest business day to the 1st & 15th. Alpha Picks removes stocks based on rating thresholds (i.e., when a rating changes to a sell). Performance is calculated and reported daily using time-weighted returns. For more details on the performance calculation and methodology of Alpha Picks, click here.
Past performance is no guarantee of future results. Alpha Picks does not take account of your objectives or your financial situation and does not offer any personalized investment advice. Any content and tools on the platform are offered for information purposes only. Any views or opinions expressed may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker, U.S. investment adviser, or investment bank. |
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