June Market Strategy: Mario Draghi's a Bull - Analyst Blog

The following is excerpted from John Blank's full Market Strategy Report for June. To access the full PDF, please click here.

In June, Mario Draghi offered global bond markets unprecedented and historic ECB easing. That is keeping long-term interest rates in Europe and the U.S.A. down. In turn, Mario Draghi keeps a put under global stock markets. The bull is winning. The ECB is the major global stimulator now.

Look for Bump in Q2 Real GDP Growth

According to the San Fran Fed, real GDP grew a disappointing -0.1% in Q1-14, according to initial data. Unusually severe weather in many parts of the country slowed residential and business fixed investment activity considerably.

However, despite a slowdown in retail sales, overall growth in personal consumption expenditures remained solid in Q1, propelled by spending on a wide array of services.  Moreover, employment growth picked up substantially over the past three months, largely offsetting the winter lull.

The San Fran Fed anticipates economic activity will recover strongly in Q2, with above-trend growth of around +4%, before settling down for 2H.

Three factors justify this optimism: Investment activity is expected to rebound from the effects of severe weather. Accommodative monetary policy has improved access to credit.  Greater stability in labor markets will continue to solidify gains in spending.

Zacks Sector/Industry/Company Telescope

Zacks Ranked industries bunched around Market Perform in June.  

Leading the way was the Info Tech sector.  Resurgent Electric Utilities and Oil E&P look good.  On top of that, Railroads and Airlines, and Leisure and Home Furnishings industries are positive stories to note.

(1) Info Tech is a Very Attractive Sector. The leader is Semiconductors, followed by Office Equipment and Software Services.

Company to Take a Look at:  Avago Technologies AVGO

(2) Utilities are a Very Attractive Sector in June.  Look at Water Supply and Electric Power.

Company to Take a Look at: Korea Electric Power KEP

(3) Industrials are near the top of Market Performers. Look into Railroads, Machinery, Airlines and Conglomerates. Stay away from Electrical Machinery.

Company to Take a Look at: Canadian Pacific CP
 
(4) Energy is a Market Perform Sector. The leading industries are Coal and Oil Exploration & Production. Losers are the big Integrated Oil Companies.

(5) Consumer Discretionary is a Market Perform Sector. The longstanding winners are found in Leisure Services and Home Furnishing-Appliance industries. The Auto/Tire/Truck business was poorly ranked this time.

(6) Consumer Staples is a Market Perform Sector. The leader is Agri-business and Soaps & Cosmetics. The loser is Food/Drug Retail.

(7) Financials are a Market Perform sector. The cyclical Insurance industry leads again. The losers are Major Banks and Investment Funds.

(8) Telcos moved up to a Market Perform Sector.

(9) Materials stood as a Market Perform Sector. Look at Attractive Containers & Glass and Metals-Non-ferrous, and Steel industries for a bullish global cyclical play.

(10) Health Care is an Unattractive sector now. Medical Care is the most Unattractive.

This article has been excerpted from John Blank's full Market Strategy Report for June. To access the full PDF, please click here.
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