Fast Money Gets It Wrong Now: Zacks Sept. Market Strategy

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Welcome! Here’s a short review of Zacks 26-page September 2016 Market Strategy Report.

To start, I want to make a declaration up front. I am not a U.S. decline-ist. By that, I mean I am not one with the opinion the U.S. economy has seen its better days and is presently in decline. However, I do think the fast money has overbid this nation’s financial markets at this moment in time.

My September Theme: U.S. Markets Look Overbid – While Global Fundamentals Have Turned

Let’s inspect two U.S. and global charts to get the ball rolling…

First, I show the absolute level of U.S. GDP in Green. The U.S. level is on a clean rise to $17.9 trillion (in USD dollar terms) the last 6 years. China is Blue. It is around $12 trillion, also a clean, albeit stronger rise.

GDPs of Japan, Germany and the UK are at the bottom. The orange line is Japan. It approached $6 trillion in 2012. Japan then declined on US dollar strength vs. the yen and weak internal growth combined. I think China’s GDP rise does cause some of Japan’s torpor.

Now, to a different chart, and a different issue: The reality of U.S. dollar strength. Since 2012, the US dollar’s value has steadily grown. Further, it has strengthened against ALL foreign currencies.

A second chart (below) shows. The British Pound trades at multi-year highs against the US dollar, after Brexit. So too does the Mexican Peso, shown next. Ditto the Canadian Dollar and even the Indian Rupee at the very bottom.

The U.S. dollar is king. Book that vacation abroad. Now is the time to see London, or go to Cancun, or Vancouver.

The idea the U.S. is seeing slower export growth --due to a strong U.S. dollar-- granted via fast capital sucked into the U.S. from abroad? Now, that’s a reality!

Now, about that fast capital shifted to U.S. risk markets? -- It may be headed in the wrong direction.

According to data published in the FT, a recent GDP global growth recovery has been especially pronounced in the emerging economies, where growth is now exactly at its +5.5% trend rate.

Read my primary Zacks strategy report for details!

Zacks Sector/Industry/Company Telescope

Other than the perennially strong domestic sector Health Care, September Zacks Industry Ranks are clear: The global economy is indeed where positive EPS estimate revisions, and therefore more attractivegrowth, is coming from now.

The leader is Info Tech, that most global of industries. Semiconductors lead the way. Telcos got a big industry upgrade. This shows the power of still spreading wireless demand and telco equipment upgrades. Materials are the final Attractive sector. This can ONLY happen when China's growth stabilizes.

(1) Info Tech is the star. This highly global sector stays at Very Attractive. The leader is Misc. Technology followed by Semiconductors, a perennial strong industry suit to play. Telco Equipment looks good too.

Attractive Company to look at: Micron ( (NASDAQ:MU) ). The Semi-Memory industry is #4 out of 265 Zacks Ranks.

Micron Technology, Inc. has established itself as one of the leading worldwide providers of semiconductor memory solutions.Its shares currently get a short-term Zacks #2 (BUY) Rank, which joins an attractive Zacks long-term VGM score of B.

(2) Telcos are the big sector upgrade in September, getting to the Very Attractive rating, and helping to explain the strong Info Tech industries, much of the time. The best are Utility-Telephone and Telco Equipment.

Attractive Company to look at: Telefonica (MC:TEF) ( (NYSE:TEF) ).The Diversified Telco industry is #34 out of 265 in Zacks Industry Ranks.

Telefonica S.A. is the largest supplier of teleco services in the Spanish and Portuguese speaking world. Its shares currently get a short-term Zacks #2 (BUY) Rank, which joins an attractive Zacks long-term VGM score of B.

(3) Health Care slips to Attractive this month. The best is Medical Care.

Attractive Company to look at: Usana Health Sciences ( (NYSE:USNA) ). The Drugs industry is #82 out of 265 in Zacks Industry Ranks.

USANA Health Sciences Inc. develops and manufactures high-quality nutritional, personal care and weight management products. Its shares currently get a short-term Zacks #1 (STRONG BUY) Rank, which joins an attractive Zacks long-term VGM score of B.

(4) Materials stay Attractive. The best is Metals-non-Ferrous, which says China is stabilizing. The next best are Containers & Glass and Steel. Again, a good China signis here.

(5) Utilities stay at Market Weight.

(6) Energy remains a Market Weight. The industries in the very middle are Pipelines, Exploration & Production, Coal, and even the Drillers and Oil & Gas Integrated and Solar-Alternates. All cluster at Market. Only Oil-Misc. stinks.

(7) Consumer Staples looks Unattractive again this month. Yet, there are bright spots. Food and Consumer Product-Misc. Staples look great.

(8) Consumer Discretionary rises to Unattractive from Very Unattractive. The bright spot is Apparel. Home Furnishing-Appliances is next in line. Leisure and Autos/Tires/Trucks hold the sector back.

(9) Financials stay at Unattractive. The best industries right now appear as Consumer Finance, Real Estate, Banks-Major, and Banks & Thrifts. A September or December Fed rate hike would mostly help here.

(10) Industrials fall to Very Unattractive. In a low growth overall environment, business spending mostly stagnates. The exception looks to be Business Products, which is very attractive. All other Industrials industries are in the doldrums. The airlines with their low price wars are at the bottom now.