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Morning Commentary

Looking Into 2018

By Charles Payne, CEO & Principal Analyst
12/28/2017 9:02 AM
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Pending home sales were reported up slightly yesterday but I would take the “news” with a grain of salt because it’s been an ineffective indicator of housing for a very long time. 

But, I would point out the statement from the National Association of Realtors Chief Economist: “The housing market is closing the year on a stronger note than earlier this summer, backed by solid job creation and an economy that has kicked into a higher gear.”

He went on to echo concerns about entry-level homes and the pressing issue of lack of supply which continues to pressure prices higher.

"However, new buyers coming into the market are finding out quickly that their options are limited and competition is robust…one of the biggest questions for next year is whether supply can improve enough to slow price growth and keep home purchases more affordable.” Lawrence Yun

The bottom line is that from a macro point of view, the economic rebound continues to gather momentum as we head into 2018 and that benefits all segments of society.

Lazy Post-Christmas, Pre-New Year’s Days

Although we don’t have the idyllic weather, the stock market feels like it’s stuck in those periodic lazy hazy summer weeks where people are more interested in sunshine and fresh air.

This week’s doldrums will only become more pronounced over the next couple of days, but make no mistake, this market is like a coiled spring and investors are going to return next year ready to join the action. 

The big question is what will drive the market and which sectors will outperform?

Can Tech Reload?

Over the past month technology has struggled. The S&P Technology Sector is trading slightly lower than where it was on November 28th.  Of course, the index is up 33% this year, far and above all other sectors, and these sorts of pauses have been consolidation points for the next leg higher.  Of course, tech can pop again and in many respects is only just beginning to live up to the hype.

New Momentum Darlings?

Industrials and Materials are both rocking at highs of the year and the question is, can these names attract the kind of cash looking for quick returns?  I think professional investors would be wise to ditch the algorithms and fancy gimmicks and invest in American growth.

The great news is there is still value in these names on a historic basis and adjusted for rapidly improving top and bottom line trends.  My bullishness on these sectors is without a massive infrastructure deal or even a southern border wall.  The former should happen while the latter might be more difficult next year despite political promises.

Forget Dividends in Higher Rate Environment?

The S&P Utility Sector has been hammered, down 6.8% since November 14th, as investors ditch the safety of dividends in favor of growth at greater risk.  I think there is room for dividend stocks in most portfolios, but outside of widows and orphans and folks with millions at risk it’s been a mistake to focus solely on yield for a long time.

Can financials live up to the hype?

The smartest guys in the room have seen their business models fold into living and dying strictly on trading and might need more than lower taxes to justify higher share prices. I’m mixed on financials, although I have a soft spot for regional banks.  There is action underway to remove the burdens of Dodd Frank on 30 of 36 banks currently deemed ‘too big to fail’; which I think unlocks a return to old school lending.

Today’s Session

Looks like we’ll have a slight pop at the start of trading, but the key is sustaining it throughout the day as more traders hit the road.


I think the utilies have hit a support zone and look to rebound especially if we get a good infrastructure deal.

Rhonda Lyons on 12/28/2017 9:23:54 AM
Like and watch Charles Payne show--Making money on Fox Business

James H. Loggins on 12/28/2017 7:06:07 PM
Charles it's great to have you back on Fox Business. I've been trying to follow your recommendations on TV. Thank you!

David Jasinsky on 12/28/2017 10:10:47 PM
Great report and heads up for 2018 Charles. I sure appreciate your hard work.

scott gillespie on 1/2/2018 11:32:25 AM

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