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US Strategy Comment: Select Market Observations as the Calendar Flips to 4Q


Points to Consider Heading Into Final Months of the Year

Although the market selloff in September caused a great deal of panic among investors, we still believe the S&P 500 index will end 2020 higher than current levels, and we remain confident in our year-end price target of 3,650. That being said, as we head into the final months of what has truly been an unprecedented year, we thought it would be helpful to briefly highlight some key observations and trends in the market that we have been discussing with clients or that we believe have been flying under the radar of investors.

Key Observations:

  • Expect an Increase in US Stock Market Volatility

    • US stock market is approaching the most volatile time of the year

  • No Love for Financials

    • S&P 500 sector weight for Financials hitting levels not seen since Great Financial Crisis

  • Dividend Attributes of Pharmaceuticals and GARP Characteristics of Biotechnology Being Underappreciated

    • Pharma and Biotech have been notable performance laggards since the market trough despite offering attractive dividend yield and GARP attributes, respectively.

  • Pick Your Spots Within Consumer Staples

    • Increasing NTM P/E differentiation among Consumer Staples stocks suggests that stock picking is key in the sector

  • Materials Catching a Bid as Commodity Prices Recover

    • Materials relative performance has staged a strong rebound amid rising commodity prices and a declining US dollar

  • Investors Flee to Utilities During September Selloff

    • Dividend yield is important for Utilities, but make sure to also examine dividend growth expectations

Implementation Strategies:


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Brian Belski Chief Investment Strategist

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