Resolve, Rotation, Resolution with Special Rotation Ideas
Resolve, rotation and resolution are the current themes of this amazing market.
While it does get frustrating to see headlines cloud fundamentals and factual trends, the market exhibited great resolve this entire summer, and since the low of early spring.
I have to say one of my biggest concerns all year has been limited leadership, and whether the broad market could rally without the fabled big tech names that have dominated the action for so long. For the last couple of weeks, I kind of thought that moves into consumer staples was a pit-stop for big money. However, earnings from Walmart (WMT) underscored that beyond nice dividend yields, there could be big money made.
Speaking of rotation, even when nerves have been rattled, money hasn’t raced into gold, which was supposed to signal the start of the next calamity. In fact, the gold road was the Great Recession wave for a couple of years, but it has faded since 2011. Now, gold is nearing a key support point at 1,127.
I know the experts keep telling us China has unlimited tricks up its sleeve to beat America in a trade war like devaluing its currency. That used to be the case; right now, it poses a dilemma, not unlike Scylla and Charybdis because consumer spending is the largest percent of China’s Gross Domestic Product (GDP) in history.
Moreover, the Chinese stock market continues to meltdown and President Xi Jinping must pay attention:
We know the bottom line moves the stock market’s needle, and earnings have broken out to an all-time high. There can be a lot of shenanigans at the bottom of the income statement. Top line growth has been robust as more businesses are able to pass on higher prices without derailing volume.
I think it’s time for investors to begin rebalancing their portfolios:
Special Rotation Ideas
I say follow the earnings and follow management teams ahead of the Omni-Channel curve.
Soda Stream fetched a takeover at a level substantially higher than it might have a year ago. This points to the notion there could be hefty premiums for consumer staples names. I think SJM is a name that will get a bid soon. Then, there are the names in the sector that are simply oversold.
Note: For the near term, these ideas will work better as trading vehicles, but fundamentally, once the dust settles on the US-China trade spat; these are names I think long term investors should consider.
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