Wednesday, September 11, 2013

In & Out of Fashion (excerpt)

It’s Fashion Week in New York City. It also seems to be fashion week in the stock market, with the bulls strutting down the catwalk while the bears are no-shows. Actually, investment styles have been changing rapidly all year. Consider the following:

(1) Dividend-yielding stocks. During the winter season, dividend-yielding stocks were the rage. They fell out of favor during the summer as bond yields soared. For example, S&P 500 Utilities were up by 18.4% ytd on April 30. Now they are up 6.1%. (However, S&P 400 Utilities are still up 16.8% ytd.) S&P 500 Telecom Services is up only 2.7%, well below the peak ytd gain of 15.6% on April 23.

(2) Interest-rate-sensitive stocks. Homebuilding and other interest-rate-sensitive stocks were also sold along with bonds during the summer. S&P 500 Homebuilding is down 29.6% since May 14, and down 9.6% ytd. However, Household Appliances and Home Improvement Retail are still up solidly so far with gains of 34.6% and 24.2%. While investors are worrying that rising mortgage rates may slow home sales, they must expect that owners of existing homes will spend plenty of money on remodeling.

Today's Morning Briefing: Go Global? (1) In and out of fashion. (2) Dividend yielders are out. (3) Retailers are pricey. (4) European shares have upside in revenues, margins, and P/Es. (5) Crises in some EMs turn into buying opportunities. (6) Some upbeat data made in China. (7) Commodity prices still flat-lining. (8) Energy and Materials likely to remain underperformers. (9) Global warming for investors. (10) Downgrading Consumer Discretionary to market weight. (11) Upgrading IT and Health Care to overweights. (More for subscribers.)

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