Author: Kenley Scott

Kenley Scott is a senior equity analyst and sector strategist covering the APAC region and the Energy sector. He is a member of the Global Focus List Committee, which approves all equity recommendations for developed, emerging, and frontier markets. Kenley also writes the Global Sector Summary, part of the Sector Strategy service, which identifies emerging sector strength and weakness across 46 countries every week. After working as a commodities broker, Kenley joined the firm in July 2006. He has a B.S. in Statistics from the University of California, Riverside and also holds a Series 65 securities license.

Global Sector Commentary

Posted on by Kenley Scott

Key Points:
2018 will mark the worst year as well as the worst Q4 period for the S&P 500 since 2008.

Outside of the Utility and Consumer Staple sectors, both flat and down 6% in Q4, the other nine sectors were down from 13% (Health Care) to 25% (Energy).

At the Industry Group level, all but four of 197 groups were negative in Q4. The average loss was more than 18% and 39 groups were down at least 25%. The four positive groups were Auto Manufacturers, Mining-Gold/Silver/Gems, Food-Confectionary, and Retail/Whlsle-Auto Parts.

Despite the weakness, Q1 seasonally is a strong quarter, especially in the third year of a presidential cycle. Even when Q4 has been negative, Q1 was still strong in third years.

Global Equity Strategy Webinar with Randy Watts and Kenley Scott – January 10, 2019

Posted on by Kenley Scott

William O’Neil + Co. Chief Investment Strategist Randy Watts and Director, Research Analyst Kenley Scott discussed current market conditions, including a favorable Q1 setup in the U.S. that was confirmed by last week’s follow-through day, despite the overhang of a weak recent trend in the major indices. Globally, they examined the upgrade of European markets such as France and Germany and the continued relative outperformance of emerging markets like Brazil, India, and smaller markets Indonesia, the Philippines, and Qatar.

Global Sector Commentary

Posted on by Kenley Scott

Key points:

  • VIX all-time low weekly average of 11 in 2017. 2018’s average is around 15 so far, but still well below the 28-year average of 19.
  • Current levels of just above 20 are elevated but have not spiked during the most recent selloff and retest of November lows (February’s spike was to ~50).
  • Expectations should be for elevated volatility until a resolution to the upside (indices back above 50-/200-DMA) or a major capitulation event.

Global Sector Commentary

Posted on by Kenley Scott

Key points:

A strong week globally, including resumption of a Confirmed Uptrend in the U.S. Two new Focus List adds, LTHM and SBUX.

Overall, however, emerging market have taken the global lead. The proportion of emerging markets in an uptrend is higher than on the developed side for a twelfth week.

Brazil and India are two of the top four markets year-to-date (behind only Qatar and Israel).

In Brazil we like travel-related, financials, and retail groups. Cvc Brasil ( CVC.BR ) and Sul America ( SUA.BR ) are among actionable GFL picks.

In India, consumer goods and drugs are the leaders out of the correction.

Elsewhere in EM, less breadth, but improving. This week’s two adds are Bank Central Asia (BCA.ID) and Bim Birlesik Magazalar ( BMI.TR ).

In HK (still main proxy for China in EM), a couple actionable November adds include Vitasoy ( VITA.HK ) and Austnutria ( AUST.HK ).

Global Sector Commentary

Posted on by Kenley Scott

Key points:

This is the first time since May 2016 that Utility and Consumer Staple have held the top two positions.

In that case, both had led consistently through much of late 2015 and the first few months of 2016 as the general market worked through a severe correction.

Looking beyond defensives, the fastest improving non-defensive industry groups from Cyclical, Material, Transport, and Financial sectors include the following, highlighted in green.

Although there are positives here, the weakening of some of the largest groups, like Retail-Internet, Internet-Content, Oil&Gas-Integrated, Finance-CrdtCard/PmtPr, and Medical-Biomed/Biotech is difficult to counter, as these five have more total market capitalization than all 24 of the highlighted groups combined.

Global Sector Commentary

Posted on by Kenley Scott

Key points:

Our outlook on U.S. markets has turned cautious for three primary reasons.

First, U.S. markets were moved to an Uptrend Under Pressure on November 12 after heavy selling pressure hit the indices following the November 7 follow-through day.

Second, the long-term uptrend of growth sectors, specifically Technology, Health Care, and Retail, continues to weaken over the last four to eight weeks. A few key industry group ETFs that we monitor are testing or have broken below long-term support at their 200-DMA. The ETF charts of software ( IGV ), semiconductors ( SOXX ), and med-tech ( IHI ) are below.

And finally, defensive groups, including Staple, Utility, and Telecoms, are leading over the short term. Actionable ideas include: China Telecom ( CHA ), Rogers ( RCI ), Shenandoah ( SHEN ), Puxin ( NEW ), NRG Energy ( NRG ), OGE Energy ( OGE ), Evergy ( EVRG ), Atmos ( ATO ), One Gas ( OGS ), American Water Works ( AWK ), American States Water ( AWR ), Coca Cola European ( CCEP ), Coca Cola ( KO ), Helen Of Troy ( HELE ), Procter & Gamble ( PG ).

Global Sector Commentary

Posted on by Kenley Scott

Key points:

U.S. indices still hold a wide lead year-to-date versus global ETFs ( EFA, EEM, AAXJ, IEV ), but the lead has stopped stretching over the past two months.

Despite slightly better international market action, U.S. indices are much more near highs  and therefore have seen a bigger uptick in the number of breakouts over two weeks.

This has led to more U.S. Focus List additions ( 8 ) than international ( 4 ) this week.

The theme of additions in the U.S. is non-bank Financials, Tech (both software and hardware), and medical products.

The theme of additions internationally is Staples and Banks.

Global Sector Commentary

Posted on by Kenley Scott

Key points:

Bottoming process is beginning with 10 follow-through days ( Japan, India, China, Brazil, Norway, Austria, Thailand, Philippines, South Africa, Singapore ). These markets join a few others, including Brazil, already in an Uptrend.

Of the group, among the most constructive are Brazil, Japan, India, Norway. Brazil is only major market at all-time highs.

Best stocks from this group include Localiza Rent-A-Car ( LOC.BR; RENT3 BZ ), Lojas Renner ( LE3.BRl LREN3 BZ ), Fast Retailing ( RETA.JP; 9983 JP ), Asahi Intecc ( AS@H.JP ), Divis Laboratories ( DVL.IN; DIVI IN ), Marine Harvest ( MHG.NO; MHG NO ), and DNO ( DNO.NO; DNO NO ).