{"id":2089,"date":"2020-07-20T03:44:38","date_gmt":"2020-07-20T03:44:38","guid":{"rendered":"https:\/\/straussresearch.com\/?p=2089"},"modified":"2020-07-20T04:13:53","modified_gmt":"2020-07-20T04:13:53","slug":"market-comments-week-ending-7-17-20","status":"publish","type":"post","link":"https:\/\/straussresearch.com\/index.php\/2020\/07\/20\/market-comments-week-ending-7-17-20\/","title":{"rendered":"Market Comments:  Week ending 7-17-20"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"2089\" class=\"elementor elementor-2089\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-73cdf1d elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"73cdf1d\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-b2ed28c\" data-id=\"b2ed28c\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-7ece9d7 elementor-widget elementor-widget-text-editor\" data-id=\"7ece9d7\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p>A few brief comments on sectors and industry groups:<\/p><p>Last week there were notable signs of sector rotation in the market, as many technology stocks came under some profit-taking. \u00a0The technology sector as a whole declined about 1% last week, while the strongest sectors were health care, basic materials and industrials, each of which gained about 5% for the week.\u00a0 Small caps outperformed the S&amp;P 500, and value outperformed growth.\u00a0<\/p><p>This group rotation is related to the recent news of progress on a virus vaccine, and optimism that a vaccine might be ready by the end of this year, which would be good news for the economic recovery.\u00a0\u00a0<\/p><p>The large cap technology stocks have acted as safe havens amid the virus crisis, because they have steady earnings growth and in many cases they benefit from the \u201cwork from home\u201d trend.\u00a0 In recent weeks these big cap technology stocks have been outperforming on days when the news backdrop is worrisome (a \u201cRisk Off\u201d environment).\u00a0 On the other hand, small caps, cyclicals and value stocks have been outperforming on days when there is positive news on a vaccine, or other developments suggesting a strong economic recovery ahead (a \u201cRisk On\u201d environment).\u00a0<\/p><p><u>The homebuilding group looks good<\/u><\/p><p>Amid these crosscurrents, our weekly review of fundamental and technical data highlights several parts of the market that currently look attractive.\u00a0 \u00a0<\/p><p>One of these is the homebuilding stocks.\u00a0 Housing demand has remained strong despite the virus, and the industry\u2019s fundamentals are sound:<\/p><ul><li>Mortgage applications recently rose by 33% year-over-year.<\/li><li>Housing starts rose 17% in June to an annual rate of 1.19 million.<\/li><li>The National Association of Homebuilders (NAHB) sentiment index rose to 72 in July, up from 58 in June.<\/li><li>Mortgage rates (30-year fixed rate) have fallen to 2.98%, a record low.<\/li><\/ul><p>Many of the homebuilding stocks have good fundamentals and bullish ratings from the quantitative stock selection model that we use, which is based on factors such as earnings growth and earnings estimate revisions.\u00a0 Also, compared to most technology stocks, the homebuilders have very attractive valuation levels.<\/p><p>In addition most of these stocks now have good technical positions.\u00a0 They had good relative strength as the market rallied in April and May, then for about the last 5 \u2013 7 weeks they have been pulling back to their 50-day moving averages, forming bases or consolidation periods.\u00a0<\/p><p>Over the past two weeks, some of them have broken out to new highs from these bases.\u00a0 Examples are shown in the following two charts.<\/p><p><u>Figure 1\u00a0 Lennar (LEN)\u00a0 Weekly chart\u00a0 <\/u><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-e083e33 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"e083e33\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-4d5cebc\" data-id=\"4d5cebc\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-35bce93 elementor-widget elementor-widget-image\" data-id=\"35bce93\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img fetchpriority=\"high\" decoding=\"async\" width=\"1024\" height=\"725\" src=\"https:\/\/i0.wp.com\/straussresearch.com\/wp-content\/uploads\/2020\/07\/LEN-W-July-2020.png?fit=1024%2C725&amp;ssl=1\" class=\"attachment-large size-large wp-image-2093\" alt=\"\" srcset=\"https:\/\/i0.wp.com\/straussresearch.com\/wp-content\/uploads\/2020\/07\/LEN-W-July-2020.png?w=1200&amp;ssl=1 1200w, https:\/\/i0.wp.com\/straussresearch.com\/wp-content\/uploads\/2020\/07\/LEN-W-July-2020.png?resize=300%2C213&amp;ssl=1 300w, https:\/\/i0.wp.com\/straussresearch.com\/wp-content\/uploads\/2020\/07\/LEN-W-July-2020.png?resize=1024%2C725&amp;ssl=1 1024w, https:\/\/i0.wp.com\/straussresearch.com\/wp-content\/uploads\/2020\/07\/LEN-W-July-2020.png?resize=768%2C544&amp;ssl=1 768w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-47d9acb elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"47d9acb\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-749d079\" data-id=\"749d079\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-6a7e50b elementor-widget elementor-widget-text-editor\" data-id=\"6a7e50b\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p><u><br \/><br \/>Figure 2\u00a0\u00a0 D.R. Horton\u00a0 (DHI) &#8212; Weekly chart\u00a0 <\/u><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-3db23bd elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"3db23bd\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-d4987d4\" data-id=\"d4987d4\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-d12d8e7 elementor-widget elementor-widget-image\" data-id=\"d12d8e7\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img decoding=\"async\" width=\"1024\" height=\"725\" src=\"https:\/\/i0.wp.com\/straussresearch.com\/wp-content\/uploads\/2020\/07\/DHI-W-July-2020.png?fit=1024%2C725&amp;ssl=1\" class=\"attachment-large size-large wp-image-2096\" alt=\"\" srcset=\"https:\/\/i0.wp.com\/straussresearch.com\/wp-content\/uploads\/2020\/07\/DHI-W-July-2020.png?w=1200&amp;ssl=1 1200w, https:\/\/i0.wp.com\/straussresearch.com\/wp-content\/uploads\/2020\/07\/DHI-W-July-2020.png?resize=300%2C213&amp;ssl=1 300w, https:\/\/i0.wp.com\/straussresearch.com\/wp-content\/uploads\/2020\/07\/DHI-W-July-2020.png?resize=1024%2C725&amp;ssl=1 1024w, https:\/\/i0.wp.com\/straussresearch.com\/wp-content\/uploads\/2020\/07\/DHI-W-July-2020.png?resize=768%2C544&amp;ssl=1 768w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-0fcd0ce elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"0fcd0ce\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-cccf8b1\" data-id=\"cccf8b1\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-e9ab345 elementor-widget elementor-widget-text-editor\" data-id=\"e9ab345\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p>Note:\u00a0 in our model portfolio that we published in February, before the virus crisis began, we overweighted the homebuilding stocks, as they had good fundamentals and good technical patterns in February.\u00a0 They declined sharply when the market plunged in March, but since then have recovered, and now look poised to move higher.<\/p><p>The strength in residential construction also supports related industries.\u00a0 \u00a0Some of the building materials stocks look good, such as Owens Corning (OC) and Masonite (DOOR), along with retailers such as Lowe\u2019s (LOW).<\/p><p><br \/>Another attractive market sector is health care, specifically pharmaceutical or biotech stocks such as Abbott Labs (ABT), AstraZeneca (AZN) and Moderna (MRNA), along with names in the diagnostics &amp; research group such as Charles River Labs (CRL), Perkin Elmer (PKI) and Laboratory Corp. of America (LH).\u00a0<\/p><p>A variety of other industry groups also look good based on a combination of fundamentals and technicals, including trucking stocks such as Marten Transportation (MRTN) and SAIA Inc. (SAIA).<\/p><p><br \/>In conclusion, these are a few areas of the market that look particularly attractive as of mid-July 2020.\u00a0 Second quarter earnings season is still unfolding, which may lead to heightened market volatility for the next few weeks.\u00a0 For a more detailed discussion of the general market environment, please see our second quarter review letter, which was written in early July.<\/p><p>Note:\u00a0 this comment was posted on July 19, 2020.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>A few brief comments on sectors and industry groups: Last week there were notable signs of sector rotation in the market, as many technology stocks came under some profit-taking. \u00a0The technology sector as a whole declined about 1% last week, while the strongest sectors were health care, basic materials and industrials, each of which gained [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"site-sidebar-layout":"default","site-content-layout":"default","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[4],"tags":[],"class_list":["post-2089","post","type-post","status-publish","format-standard","hentry","category-market-comments"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.7 - 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