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Morning Commentary

Good Buenos Aires

By Charles Payne, CEO & Principal Analyst
12/3/2018 9:39 AM
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The market rebound last week was very impressive with several messages laced throughout, but essentially saying money wants exposure to equities when all the dark clouds and unknowns have faded.

Healthcare led the way, as it’s emerged as a perfect combination of yield and upside potential.  Technology was the second best performer even without Apple leading the way (the stock was up 3.65%).   The confident and wealthier consumer helped consumer discretionary names outperform.

 

  S&P 500 Index

+4.85%

  Communication Services (XLC)

+4.94%

  Consumer Discretionary (XLY)

+5.85%

   Consumer Staples (XLP)

+2.68%

   Energy (XLE)

+3.44%

   Financials (XLF)

+3.73%

   Health Care (XLV)

+6.95%

   Industrials (XLI)

+4.03%

    Materials (XLB)

+2.44%

    Real Estate (XLRE)

+2.67%

    Technology (XLK)

+6.02%

     Utilities (XLU)

+2.74%

 

 

Market Breadth

Market breadth improved throughout the week, including new highs versus new lows.

Last Monday only 14 stocks on the NYSE hit new 52-week highs, by Friday that number popped to 57 and the NASDAQ, which saw 14 new highs on Tuesday, climb to 51 on Friday.

By the way I mentioned healthcare which has been powered by big drug makers including Merck (MRK) and Pfizer (PFE) which both closed at 52-week highs on Friday, will be higher today on the massive $5.1 billion premium paid to cancer drug maker Tesaro (TSRO) by GlaxoSmithKline (GSK).

Trade Truce

I have to say I’m not shocked at financial media pouring cold water on the trade truce considering there was very little support for President Trump, even as everyone had to agree America is getting ripped off on intellectual property.

It’s early in the process, but what happened over the weekend in Buenos Aires is remarkable.  China not only came to the table on trade but extended more olive branches and announced a serious commentmentcommitment to reach an ultimate agreement.

Remember to Watch what They Do

Wall Street wants Trump to fail because they don’t want margin pressure and really don’t want any stability to the money-machine that is the current global economic arrangement.  That said, remember I always ask investors to watch what they do. 

So far this morning, one of the biggest doubting firms being quoted ( CNBC and Washington Post) is Evercore ISI.

The early returns confirmed the assessment of Evercore ISI’s Terry Haines, who writes in a note this morning that the agreement "continues to be a very likely strong short-term market positive," though "the dinner result is only a temporary pause in trade war escalation, and market enthusiasm this week should and likely will be tempered accordingly."

Washington Post

I want to note:

Evercore upgraded Chart Industries (GTLS) to outperform this week…a curious action if they think this is only a short-term pop and no big deal since this company in a great way has exposure to China’s growing natural gas packaging and LNG from the United States

Current WSS Portfolio Approach Portfolio Distribution

I was worried about materials las week but the fundamental story and value proposition for 2019 looks promising.  I think money was simply moving into sectors considered better safe havens.  The fact is, materials are very inexpensive here.

Communication Services

Consumer Discretionary

Consumer Staples

Energy

Financials

Health Care

2

2

1

1

1

1

Industrials

Materials

Real Estate

Technology

Utilities

Cash

2

4

0

3

0

3

 

 

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