Scott Martindale  by Scott Martindale
  President & CEO, Sabrient Systems LLC

First off, I am pleased to announce that Sabrient’s Q1 2021 Baker’s Dozen portfolio launched on January 20th! I am particularly excited because, whereas last year we were hopeful based on our testing that our enhanced portfolio selection process would provide better “all-weather” performance, this year we have seen solid evidence (over quite a range of market conditions!) that a better balance between secular and cyclical growth companies and across market caps has indeed provided significantly improved performance relative to the benchmark. Our secular-growth company selections have been notably strong, particularly during the periods of narrow Tech-driven leadership, and then later the cyclical, value, and smaller cap names carried the load as both investor optimism and market breadth expanded. I discuss the Baker’s Dozen model portfolio long-term performance history in greater detail in today’s post.

As a reminder, you can go to http://bakersdozen.sabrient.com/bakers-dozen-marketing-materials to find our “talking points” sheet that describes each of the 13 stocks in the new portfolio as well as my latest Baker’s Dozen presentation slide deck and commentary on the terminating portfolios (December 2019 and Q1 2020).

No doubt, 2020 was a challenging and often terrifying year. But it wasn’t all bad, especially for those who both stayed healthy and enjoyed the upper leg of the “K-shaped” recovery (in which some market segments like ecommerce/WFH thrived while other segments like travel/leisure were in a depression). In my case, although I dealt with a mild case of COVID-19 last June, I was able to spend way more time with my adult daughters than I previously thought would ever happen again, as they came to live with me and my wife for much of the year while working remotely. There’s always a silver lining.

With President Biden now officially in office, stock investors have not backed off the gas pedal at all.  And why would they when they see virtually unlimited global liquidity, including massive pro-cyclical fiscal and monetary stimulus that is likely to expand even further given Democrat control of the legislative triumvirate (President, House, and Senate) plus a dovish Fed Chair and Treasury nominee? In addition, investors see low interest rates, low inflation, effective vaccines and therapeutics being rolled out globally, pent-up consumer demand for travel and entertainment, huge cash balances on the sidelines (including $5 trillion in money market funds), imminent calming of international trade tensions, an expectation of big government spending programs, enhanced stimulus checks, a postponement in any new taxes or regulations (until the economy is on stronger footing), improving economic reports and corporate earnings outlooks, strong corporate balance sheets, and of course, an unflagging entrepreneurial spirit bringing the innovation, disruption, and productivity gains of rapidly advancing technologies.

Indeed, I continue to believe we are entering an expansionary economic phase that could run for at least the next few years, and investors should be positioned for both cyclical and secular growth. (Guggenheim CIO Scott Minerd said it might be a “golden age of prosperity.”) Moreover, I expect fundamental active selection, strategic beta ETFs, and equal weighting will outperform the cap-weighted passive indexes that have been so hard to beat over the past few years. If things play out as expected, this should be favorable for Sabrient’s enhanced growth-at-a-reasonable-price (aka GARP) approach, which combines value, growth, and quality factors. Although the large-cap, secular-growth stocks are not going away, their prices have already been bid up quite a bit, so the rotation into and outperformance of quality, value, cyclical-growth, and small-mid caps over pure growth, momentum, and minimum volatility factors since mid-May is likely to continue this year, as will a desire for high-quality dividend payers, in my view.

We also believe Healthcare will continue to be a leading sector in 2021 and beyond, given the rapid advancements in biomedical technology, diagnostics, genomics, precision medicine, medical devices, robotic surgery, and pharmaceutical development, much of which are enabled by 5G, AI, and 3D printing, not to mention expanding access, including affordable health plans and telehealth.

In this periodic update, I provide a comprehensive market commentary, offer my technical analysis of the S&P 500 chart, review Sabrient’s latest fundamentals-based SectorCast quant rankings of the ten US business sectors, and serve up some actionable ETF trading ideas. To summarize, our outlook is bullish (although not without some bouts of volatility), the sector rankings reflect a moderately bullish bias, the longer-term technical picture remains strong (although it is near-term extended such that a pullback is likely), and our sector rotation model retains its bullish posture. Read on….

Stocks have needed a reason to take a breather and pull back in this long-standing ultra-bullish climate, with strong economic data and seasonality providing impressive tailwinds -- and plummeting oil prices certainly have given it to them. But this minor pullback was fully expected and indeed desirable for market health. The future remains bright for the U.S.

Scott MartindaleStocks were able to leverage some optimistic news and dovish words from the Fed to take another stab at an upside breakout attempt last week. Although readers have sometimes accused me of being a permabull, I am really a realist, and the reality is that the slogans like “The trend is your friend” and “Don’t fight the Fed” are truisms. And they have worked.

Scott MartindaleStocks continue to hold up like troopers even though bulls have lost some traction, perhaps due to a combination of the summer doldrums and overbought technical conditions that have them biding time until the next setup for a run at new highs. To be sure, bears are AWOL and missing their opportunity to create some fear and ignite a correction.

smartindale / Tag: SPY, VIX, IYF, iyw, IYJ, IYZ, IYC, IYK, IYH, IDU, IYM, IYE, FTEC, FIDU, FNCL, FUTY, FENY, FHLC, XSD, FXR, KIE, SWKS, NXPI, RTN, ALK, FITB, ETF, iShares, sectors, SectorCast / 0 Comments

Rather than a Great Rotation from bonds into equities, the rotation instead has been from growth into value. Among the ten U.S. business sectors, uber-defensive sector Utilities is still the clear leader year-to-date, up more than +10%, followed by Energy and Healthcare. Healthcare and Materials were the leaders last week. Consumer Services/Discretionary remains the clear laggard YTD. Moreover, rather than bond prices falling, the 10-year Treasury yield has fallen even further to 2.52%, further indicating a flight to safety.

smartindale / Tag: sectors, ETF, iShares, SPY, VIX, IYF, IYM, EEM, iyw, IYJ, IYZ, IYC, IYK, IYH, IDU, IYE, FTEC, FHLC, FMAT, FUTY, FSTA, FIDU, PSI, XTN, PSCM, SNDK, OPEN, ALK, UPS, BCPC, WLK / 0 Comments

Today’s market was strong with lots of volume to open the week and close the quarter.  The strongest index of the day was the Russell 2000, up 1.8%, followed by the S&P 500, up 0.8%, and the NASDAQ, up 0.7%.  NYSE volume was a strong 810 million.  The S&P 500 squeaked out a narrow 0.7% gain for the month, which is better than the NASDAQ’s 2.5% drop and the Russell 2000’s 1% drop.  The biotechnology ETF, IBB, delivered an exceptionally strong perfo

david / Tag: IBB, ALK, JAZZ, MRVL / 0 Comments

Monday’s market was marginal through most of the day, but all major indices ended the day in positive territory, led by the Nasdaq.  It was the market’s third positive close in a row and the fourth in the last five days. The S&P 500 ended the day at 1799.84, less than 3% from its all-time closing high of 1844.46.  It is now nearly 60 points above its recent low on February 3 (about a 6% drop from its high). 

david / Tag: NQ, ALK, SAIA / 0 Comments

As the charts last week indicated might happen, the S&P 500 has fallen four straight days and failed to hold its breakout above 1800 while the Dow Jones Industrials lost 16,000. Only the NASDAQ is still holding on to its breakout above 4000. Although the Basic Materials sector was the leader on Wednesday, the Technology sector was strong, as well, and in fact Tech stocks have been the strongest over the past week and the past month.

smartindale / Tag: iShares, ETF, sectors, SPY, VIX, iyw, IYH, IYF, IYJ, IYE, IYM, IYZ, IDU, IYK, IYC, CTSH, WDC, V, ASPS, SNPS, JAZZ, GNW, ALK, NXPI, STX / 0 Comments

Scott MartindaleAs stock traders take a break for Thanksgiving, all the major averages have hit new highs after breaking through psychological resistance levels, including the S&P 500 at 1800, Dow Jones Industrials at 16,000, and NASDAQ at 4000. Tech stocks were the big leaders on Wednesday after a strong earnings report from Hewlett-Packard (HPQ).

smartindale / Tag: iShares, sectors, ETF, SPY, VIX, MPC, HPQ, iyw, IYF, IYE, IYM, IYZ, IYJ, IYH, IYK, IYC, IDU, BLK, AWH, WDC, GOOG, JAZZ, GNW, ALK, NXPI / 0 Comments

Scott Martindale“Stocks fall on Fed taper discussion.” That’s the gist of what you heard in the media on Wednesday to account for the market’s late-day pullback. There’s always some sort of attempt to explain daily market action. But the reality is that investors simply must take a periodic breather to regroup and retrench, particularly when making an assault on round-number resistance for a major index.

smartindale / Tag: sectors, iShares, ETF, SPY, VIX, TSLA, MA, SBNY, CACI, QCOM, JAZZ, GNW, ALK, IYF, iyw, IYK, IYH, IYE, IYM, IYJ, IYZ, IDU, IYC / 0 Comments

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