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Stock Market Outlook for March 20, 2020


Traders were busy rotating portfolios on Thursday, away from defensive sectors and into depressed cyclical areas.

 

Real Time Economic Calendar provided by Investing.com.

 

 

*** Stocks highlighted are for information purposes only and should not be considered as advice to purchase or to sell mentioned securities.   As always, the use of technical and fundamental analysis is encouraged in order to fine tune entry and exit points to average seasonal trends.

Stocks Entering Period of Seasonal Strength Today:

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North West Co. Inc. (TSE:NWC.TO) Seasonal Chart

North West Co. Inc. (TSE:NWC.TO) Seasonal Chart

DENTSPLY Intl Inc. (NASD:XRAY) Seasonal Chart

DENTSPLY Intl Inc. (NASD:XRAY) Seasonal Chart

KBR Inc. (NYSE:KBR) Seasonal Chart

KBR Inc. (NYSE:KBR) Seasonal Chart

WEX Inc. (NYSE:WEX) Seasonal Chart

WEX Inc. (NYSE:WEX) Seasonal Chart

CubeSmart (NYSE:CUBE) Seasonal Chart

CubeSmart (NYSE:CUBE) Seasonal Chart

American National Insurance Co. (NASD:ANAT) Seasonal Chart

American National Insurance Co. (NASD:ANAT) Seasonal Chart

Brookfield Renewable Partners LP (NYSE:BEP) Seasonal Chart

Brookfield Renewable Partners LP (NYSE:BEP) Seasonal Chart

Blackrock Multi-Sector Income Trust (NYSE:BIT) Seasonal Chart

Blackrock Multi-Sector Income Trust (NYSE:BIT) Seasonal Chart

iShares Core High Dividend ETF (NYSE:HDV) Seasonal Chart

iShares Core High Dividend ETF (NYSE:HDV) Seasonal Chart

iShares Global Infrastructure Index ETF (NASD:IGF) Seasonal Chart

iShares Global Infrastructure Index ETF (NASD:IGF) Seasonal Chart

 

 

The Markets

Stocks closed mixed on Thursday as investors were observed rotating portfolio positions, away from defensive sectors that have outperformed amidst the market volatility and into beaten down cyclicals.  The S&P 500 Index gained nearly half of one percent, charting a rather indecisive candlestick.  Traders are attempting to defend horizontal support implied by the December 2018 low.  In our recent market outlook reports emailed directly to subscribers, we’ve laid out the potential path of equities going forward.  Subscribe now to follow along.

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As highlighted, sector rotation was readily apparent during Thursday’s session as Staples, Utilities, and Health Care (the defensive sectors) closed firmly lower on the day.  Meanwhile, Energy, Consumer Discretionary, Financial, and Materials (the cyclical sectors) each posted gains topping 2%.  As investors became overweight those areas of the market that outperformed as the market was falling, there is a requirement to rebalance into the end of the month and the end of the quarter to align portfolios with investment policy guidelines.  Expect more of this through the final week and a half of March.

Defensive sectors down on the day

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Cyclical sectors closed higher

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We are finally starting to see the first concrete evidence relating to an economic slowdown following the outbreak of the coronavirus.  Initial jobless claims spiked last week with the seasonally adjusted headline print moving from 220,000 to 281,000, the highest level since September of 2017.  Stripping out the seasonal adjustments, claims moved from 200,375 in the week ending March 7th to 250,892 a week later.  This has caused the year-to-date change of the claimant count to jump well above the seasonal average trend, which calls for declines in this labor market gauge through the spring.  This is suspected to be only the start of the strain on the labor market that will result from this virus, something that will become apparent in future payroll reports.  Typically, a jump in jobless claims precedes the onset of a recession and before the dramatic recessionary-related declines in stocks, but given the abrupt nature of this virus and the speed with which the market is moving ,clearly we are in a new normal.

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Another gauge of manufacturer sentiment is also reflecting the strain related to the slowdown in the economy.  The Philadelphia Fed has reported that their manufacturing business outlook survey fell to a seasonally adjusted –12.7 in March, which is a significant miss compared to the +14.0 that was expected by analysts.  Before the seasonal adjustments, the gauge read +1.7, which is well below the +26.2 that is the norm for what is typically the peak for the year for manufacturer sentiment going into the spring ramp-up in activity.  Positive values indicate expansion, while negative values indicate contraction.  This is the weakest March read since the Great Financial Crisis in 2009 when the economy was in a deep rescission. Back then, the gauge was deeply negative on a non-seasonally adjusted basis.  If we can derive a glimmer of hope from the result, it is that the reading is still positive on a non-seasonally adjusted basis, indicating expansion, rather than the outright negative print for March, which has coincided with prolonged economic declines.

Philadelphia Manufacturing Business Outlook Survey Seasonal Chart

In our subscriber exclusive content of today’s market outlook, we provide an update on the seasonal trade in Natural Gas. Subscribe now to be included on our distribution list.

Sentiment on Thursday, as gauged by the put-call ratio, ended bearish at 1.12

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Seasonal charts of companies reporting earnings today:

Tiffany & Co. Seasonal Chart BRP Inc. Seasonal Chart Hibbett Sports, Inc. Seasonal Chart Pyxis Tankers Inc. Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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