By Barbara Kollmeyer, MarketWatch
Surprised by the fact that U.S. stocks are on track for double-digit percentage gains this year?
Here’s one explanation from Sam Stovall, research company CFRA’s chief investment strategist. “It’s the third year of a presidential term in office, which historically is the strongest of the four-year presidential cycle,” he told MarketWatch in a recent telephone interview.
Since World War II, stocks have gained 16% and risen 84% of the time in year three, he says. As for year four, the average gain has been 6.3%, with markets up 78% of the time.
“It’s a good year, not a great one,” said Stovall, who also provides our call of the day and some strategies to cope with that outlook.
Here’s one for a retail investor who doesn’t have the stomach to spend 2020 reacting to geopolitical headlines. “If you’re saying you have to stick with something for a full 12 months, look at those sectors and those sub-industries that are the leaders at the end of the year,” he says.
That’s because, at least since 1990, “by sticking with winning sectors and sub-industries over the long term, you tend to outperform the broader market.”
As for sector performances, since October 31 information technology (S&P:XX:SP500.20) is up 4%, industrials 3.9%, communications services (S&P:XX:SP500.50) 3.2%, utilities (S&P:XX:SP500.55) and real estate (S&P:XX:SP500.60) down 2.4% and 2.8% respectively, and consumer staples (S&P:XX:SP500.30) up 0.5%, he notes.
Stovall’s Pacer CFRA-Stovall Equal Weight Seasonal Rotation exchange-traded fund (PSE:SZNE) (see performance here ) rotates between cyclical and defensive sectors every six months. He also suggests gravitating toward companies that have consistently paid dividends over time, via Vanguard’s Dividend Appreciation ETF (PSE:VIG) and the iShares Core Dividend Growth (PSE:DGRO) .
Demand for haven investments has been waning as stocks keep reaching out new highs. With that, gold (NYM:GC00) is prepping for its “next leg lower,” Adam Kobeissi of industry commentary The Kobeissi Letter tells MarketWatch.
The Kobessi letter
He anticipates gold at $1,445 an ounce by year-end, and $1,380 by early 2020, citing an “incredibly bearish” backdrop for the metal.
“It’s as if someone broke into the Louvre and had taken the Mona Lisa.” — Vivienne Becker, a London-based jewelry historian and author, on a Baroque jewels heist in Germany.
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