A Week’s Worth of Analysts and Economists in 5 Minutes

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The first week of June 2019 was one of those that felt like a head-scratcher. After all the “sell in May and go away” worries, what started out as an oversold rally on Tuesday became more exaggerated as equity investors ironically have started cheering for weaker economic readings.

The Dow Jones industrials and S&P 500 were up 5% late on Friday from Monday’s closing prices, and that was after a dismal May knocked out close to half of the year’s strong gains. It turns out that bad news ironically is being digested as good news right now. The current logic in the market is that weaker economic readings will force Federal Reserve Chair Jerome Powell to cut interest rates sooner rather than later. This also keeps the notion alive that perhaps low interest rates may become a permanent normal and not just a sort of stagnant new normal.

Even with Powell and Fed-heads talking about the possibility of lowering interest rates and that they are monitoring economic developments, it still feels strange after almost 30 years of seeing the business cycles to cheer for weaker economic growth reports. It’s almost like cheering that your effective tax rate is lower because your income got cut in half.

This weekend’s message is neither doom nor boom. Last weekend’s message noted that there are some great bargains in quality companies for long-term investors and that some companies and sectors were trading as though the next recession already has started. The economy is slowing, but things are still relatively good. Unemployment remains at 50-year lows and wages in May were up 3.1% from a year ago, and household net wealth increased by the most in almost 15 years. Consumer borrowing is also not stretched at all, and personal balance sheets are strong. Even with weaker payrolls, there are still more job openings in America than there are able-bodied people to fill them. And the impact from China tariffs is less than the media scared you about, while tariffs against Mexico may be given a delay to work issues out. The IMF talked down the economy and Mexico took a downgrade. Through all the worries, it seems businesses are discounting those tariff woes.

Here are some ideas and considerations for your money, the markets and the economy this weekend.

Friday’s top analyst upgrades and downgrades were in American Tower, Applied Materials, Exelon, Hubspot, Schlumberger, Shopify, Splunk, Zendesk and many more. Thursday’s top analyst calls included AMD, Apple, Canopy Growth, Dell Technologies, Flex, FuelCell, IBM, MongoDB, Shopify, Tilray and Whiting.

While the rally this week was stellar (5% Dow/S&P gains in four days is not normal), many investors still think that the stock market is overbought and expensive. We looked at the Merrill Lynch research database and found five somewhat out-of-favor dividend stocks that are a steal now. And five stocks under $10 may have monster upside.

Individual Analyst Ideas

Analysts have raised already aggressive targets on Beyond Meat, and Apple and Snap are somehow both viewed as cheap stocks at the same time. The Cronos canna-biz could let your speculative portfolio fly high. Did a big U.S. Steel downgrade by Goldman Sachs mark the bottom for steel stocks? Lyft and Uber saw many positive calls that could be “hopeium” on your ride home. Look at how many retailer earnings trade as if they are already in a recession.

Health, Biotech, Pharma

Wedbush Securities has a list of cancer/oncology stocks that could double based on their presentations and data from the annual ASCO (Cancerpalooza) conference that ended. The world’s most prescribed drug class ironically may be killing you. Will promising cancer data save Amgen shares?

Autos

This seemed surprising, but the U.S. auto sector sent a letter to President Trump that they can and should meet the clean air standards they agreed to under President Obama back in 2012. So what if the biggest auto merger was called off before it even started. Also, should car prices be up this much from a year ago, even before tariffs on components?