To The Moon

2023 is coming to an end, and looking ahead to 2024, Sam Stovall, Chief Investment Strategist at CFRA Research, said there are great opportunities in the financial and industrial sectors of the US equity market: The technical support for these two sectors has improved.

Source:https://seekingalpha.com/

As of press time, the Financial Sector ETF $Financial Select Sector SPDR Fund(XLF)$ is up 9.62%, and several subsectors are expected to rise as well, including some banks and brokerage firms: $JPMorgan Chase(JPM)$ , $Bank of America(BAC)$ , $Citigroup(C)$ and $Wells Fargo(WFC)$ . In addition, some unexpected events in the regional banking sector could provide investors with buying opportunities.

Weekly Chart

The US industrial sector ETF $Industrial Select Sector SPDR Fund(XLI)$ has gained 16.01% so far this year. Lowry Research, the technical analysis arm of CFRA, said subsectors expected to rise include diversified machinery and building products.

Weekly Chart

Stovall said: "The industry is heading for an all-time high. History tells us that it is likely to rise by around 10% in the next four months once we surpass the previous highs, ending the bear market that began in early 2022."

In addition to the two sectors mentioned above, there are some sectors and assets that also deserve attention due to recession expectations.

However, the predicted economic downturn did not materialize in 2023. So what’s in store for 2024?

An economic downturn could still be included in the forecast, experts say.

Source:https://www.cnbc.com/

Bank of America is predicting a soft landing rather than a recession, despite downside risks.

More than three-fourths of economists — 76% — said they believe the chances of a recession in the next 12 months is 50% or less, according to a December survey from the National Association for Business Economics.

Of the NABE economists who also see a downturn in the forecast, 40% say it will start in the first quarter, while 34% suggest the second quarter.

In this case, assuming that recession expectations persist, we should consider some sectors that are favorable in a recessionary environment.

If you look at historical data and trends, you will find that recession-proof assets include: High dividend stocks, consumer staples, utilities, medical stocks, bonds and gold.

1. High dividend stocks

David Kostin, the chief US equity strategist at Goldman Sachs, said in a report that stocks with high cash-yielding stocks generally outperform other stocks in times of slowing economic growth (before and after the last past three recessions, high cash-yielding stocks outperformed stocks with higher capital spending and R&D) If you expect the market to experience greater volatility, it's especially important to hold on to stocks with higher dividend yields.

2. Consumer staples/utilities/drug stocks

The United States experienced a mild economic recession in 2001 and fell into a deeper and prolonged recession in 2007 due to the onset of the financial crisis. Judging by historical data, the consumer staples, public utilities and medical sectors are generally more resilient than other sectors and have outperformed. Better than the $S&P 500(.SPX)$ .

As expectations of a recession in the US rise, consider stocks of companies whose products or services consumers will need to buy even in a recession, such as $Wal-Mart(WMT)$ , $McDonald's(MCD)$, $Home Depot(HD)$, $Procter & Gamble(PG)$ , $Unilever PLC(UL)$, $The Kraft Heinz Company(KHC)$, $AES Corp(AES)$ , $Entergy(ETR)$, $Prenetics Global(PRE)$ and $Johnson & Johnson(JNJ)$.

3. Bonds $iShares 20+ Year Treasury Bond ETF(TLT)$

In addition, most analysts believe that inflation in the US has peaked, which means that upside risks to bond yields are limited. More money will likely flow back into bonds as investors fear a recession and turn to safer investments.

From an asset allocation perspective, long-term US bonds have a significant negative correlation with the performance of US equities and an allocation to US bonds can offset the impact of falling US equities.

4. Gold $Gold - main 2402(GCmain)$

The market has adjusted to the suspension of interest rate hikes by the Fed and the expectation of interest rate cuts, and the dampening effect of interest rate hikes on the gold price has weakened significantly.

At the same time, the risk of economic recession in the United States, Europe, and other regions has increased and global inflation could remain high for a long time to come. As an asset that resists economic recession and combats inflation, the allocation value of gold is emphasized.

[USD][Allin]Questions For Tigers:

What sectors are you optimistic about in 2024?