Now, it’s been pushed back to the second greatest comeback in 2019. However, the rebound in the U.S. stock market is certainly the most underappreciated and the least celebrated event of the year.
I cheered Tiger Woods’ comeback, and I even shed a few tears. Nevertheless, the fact that the major stock indices are so close to reclaiming new all-time highs will actually impact a lot more people. I guess some will shed a tear for hanging in there, especially those that have ridden the waves since 2009. Those that have been frightened out of the market from occasional pullbacks and gyrations, or listening to the experts, are also shedding tears.
This rally also continues to be remarkable in how well-balanced winning has been across industry sectors. I still think the rally becomes more selective as more stocks become fully valued, although that doesn’t mean those with outsized valuations won’t lead the way.
S&P 500 Index | +15.98% |
Communication Services (XLC) | +18.75% |
Consumer Discretionary (XLY) | +19.50% |
Consumer Staples (XLP) | +10.67% |
Energy (XLE) | +17.80% |
Financials (XLF) | +13.94% |
Health Care (XLV) | +3.81% |
Industrials (XLI) | +19.98% |
Materials (XLB) | +15.04% |
Real Estate (XLRE) | +18.39% |
Technology (XLK) | +23.93% |
Utilities (XLU) | +10.00% |
Bernie’s Burn
Healthcare is the worst performing sector this year, initially derailed when President Trump suggested the GOP go after Obamacare without a clear replacement. More recently, it’s been hammered by Bernie Sanders’ push for Medicare for all.
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Stocks like UnitedHealth Group (UNH) are getting crushed, suffering its biggest 2-day loss in ten years. The selling is mind-boggling, but it is intriguing in the sense it means Wall Street thinks Bernie has a chance of winning in 2020. There is huge value in the space, but it’s all predicated on the notion the industry will be asked to write any major health care legislation as it wrote most of Obamacare.
This week’s earnings season picks up momentum, beginning with Goldman Sachs (GS) and Citigroup (C) today. The banks are still underperformers, but their stealth rally picked up steam on Friday with strong results from JPMorgan Chase (JPM).
The biggest loser on Friday was Netflix (NFLX), which gets a chance to prove the naysayers wrong again when the company produces its results this week.
IPO's (Initial Public Offering) are killing it, but it’s a lot of names you’ve never heard of, which might be the reason they are doing so well. Those behemoths that haven’t had 19 rounds of fundraising have left room for the public to actually make money. Some investment bankers view it as a crime for a stock to pop 50% on the first day, thinking all that money could have gone to the company.
Portfolio Approach
Communication Services 1 | Consumer Discretionary 4 | Consumer Staples 1 |
Energy 1 | Financials 1 | Healthcare 1 |
Industrial 3 | Materials 3 | Real Estate 0 |
Technology 2 | Utilities 0 | Cash 3 |
Today’s Session
Goldman (GS) and Citi (C) posted financial results this morning with the former disappointing while the latter was slightly better than expected.
Although Goldman initially rallied on the earnings beat, a closer look at business segments suggest a company with lots of holes in the business.
Goldman Results | Actual | Estimate |
Institutional Sales | $3.61 billion | $3.69 billion |
Fixed income | $1.84 billion | $1.81 billion |
Equity | $1.77 billion | $1.81 billion |
Investing & Lending | $1.84 billion | $1.87 billion |
Investment Banking | $1.81 billion | $1.65 billion |
Total Revenue | $8.81 billion | $8.93 billion |
Earnings Per Share | $5.71 | $4.89 |
Wells Fargo (WFC), on the other hand, is getting hammered on no less than four brokerage downgrades.
Levi Strauss (LEVI) fetched four buy ratings against two neutral ratings this morning.
The market is pausing for the onslaught of earnings, so buckle up and keep your head on a swivel.
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