With divergent expectations for Fed policy roiling the markets, a systematic approach to understanding potential actions is more important than ever. The Fed's Monetary Policy Report contains a section on "Monetary Policy Rules." The March 2024 section says, "Policymakers regularly consult the prescriptions of a variety of simple interest rate rules without mechanically following the prescriptions of any particular rule." The report also says, "The policy rates prescribed by these rules have now declined to values that are close to the federal funds rate." In a 2016 speech, Loretta Mester, the president of the Cleveland Fed (and a current FOMC voting member) said "I believe in a systematic approach to monetary policy, but I don't believe we are at the state of knowledge where we can choose a single policy rule to set policy because no rule works well enough across a variety of economic models and in a variety of economic circumstances." The Cleveland Fed's website provides seven "Simple Monetary Policy Rules" and three sets of forecasts for economic conditions. Our chart provides the median funds rate from these scenarios (currently 5%) along with the seventy-fifth and twenty-fifth percentiles of estimates from the array of calculations. The current target range is 5.25%-5.5%. The best-known Monetary Policy rule is a formula developed by Stanford economist John Taylor. In a 2015 commentary for the Brookings Institution, former Fed Chair Bernanke offered the following. "The (original) Taylor rule predicts that the FOMC will raise the federal funds rate (tighten monetary policy) by one half point: for each percentage point that inflation rises relative to the Fed's target, assumed to be 2 percent; or for each percentage that output rises relative to its potential." The Atlanta Fed's website has a Taylor Rule utility that can be customized. We expect the Fed to start reducing rates in the second half of this year to 5.12%.

Our analysis of recent data leads us to conclude that the U.S. economy is healthy and consumers are still leading the way. Based on the second update to 4Q GDP from the Bureau of Economic Analysis, personal consumption expenditures (PCE) contributed 2.0 points of the 3.2% increase in GDP, which was revised down from 3.3% in the first estimate. Within PCE, the huge services category was a standout, contributing 1.28 points to GDP. PCE represented 69%, or $15.6 trillion of the fourth quarter's $22.7 trillion GDP. Services represented $10.1 trillion or 45% of total GDP. Our 2024 GDP forecast is for 2.0% growth. We expect 1Q to be up 2.3%. We expect 2Q to be the weakest of 2024, with 1.3% growth ramping to 1.8% in 3Q and 2.3% in 4Q. In February, economists in the Federal Reserve Bank of Philadelphia's Survey of Professional Forecasters expected GDP to rise 2.4% in 2024, with 1Q up 2.1%, 2Q and 3Q each up 1.5%, and 4Q up 1.7%. On March 1, the Atlanta Fed's GDPNow model estimated 1Q24 growth of 2.1%. Our 2024 forecast assumes inflation continues to fall and the Fed has completed its rate-hike campaign, with monetary easing likely to begin in the middle of the year. In recent data, we have seen that January's job market was much stronger than we expected, while post-holiday retail sales were weaker than we anticipated. Walmart said, in its 4Q earnings call, that its customers are resilient but looking for value. WMT is seeing less inflation and hopefully setting a trend of passing the savings on to customers. WMT has reduced the prices of key items. While economic growth may be uneven in 2024 and into 2025, we believe the Fed has the ability to bolster growth if it falters badly. Our early forecast is for GDP to grow 2.0% in 2025. We expect the Fed will be close to meeting its dual mandate, with inflation near 2% and unemployment at approximately 4.1%.

Stocks are trading lower on Wednesday morning ahead of the release of the Federal Reserve minutes. Turning to stocks, shares of Nvidia (NVDA) are down today, with the company reporting earnings today after market close. The S&P 500 fell 0.1%, the Dow was down $0.2% and the Nasdaq lost 0.5%. Crude oil traded near $77.50 per barrel, while gold fell nearly $4 to $2036 per ounce.

Rapidly rising inflation in 2022 knocked stocks into a bear market. While growth strategies suffered the most, value strategies also declined. Even bond prices were lower last year. Stocks have recovered thus far in 2023, but gains have been largely driven by only a handful of high-tech companies. Inflation remains high and the Fed continues to raise rates. Is a recession in the offing? With all the uncertainty, is it time for investors to cash in their chips? We note that investors exit the stock market at their own peril, as long-term returns from equities consistently have outpaced long-term returns from other asset classes, such as fixed income and cash. Argus believes that Min Vol is an all-weather strategy that is timely in any investing climate. Academic literature and, more to the point, returns history, indicate that Min Vol can deliver market-matching returns on an absolute basis and superior returns on a risk-adjusted basis over various time periods.

Sustainable Impact Investing, or ESG investing, is gaining traction not only with Argus Research clients but also with the global investment community. BlackRock CEO Lawrence Fink, who oversees approximately $9 trillion in assets, announced in January 2020 that his firm would be investing in companies that are making progress on sustainability. He doubled down in his January 2021 letter, calling on company managements to disclose their plans for making their businesses "compatible with a net-zero economy" by 2050. As assets have flowed in over the past 40 years, Sustainable Impact Investing has evolved. The discipline, originally known as Socially Responsible Investing, focused at first on excluding companies that conducted business in South Africa, or participated in industries such as tobacco, alcohol, and firearms. Performance of these initial strategies lagged, and the approach has been modified. Now, instead of merely identifying industries to avoid, the discipline promotes "sustainable" business practices across all industries that can have an "impact" on global issues such as climate, hunger, poverty, disease, shelter, and workers' rights.

Sustainable Impact Investing, or ESG investing, is gaining traction not only with Argus Research clients but also with the global investment community. BlackRock CEO Lawrence Fink, who oversees approximately $9 trillion in assets, announced in January 2020 that his firm would be investing in companies that are making progress on sustainability. He doubled down in his January 2021 letter, calling on company managements to disclose their plans for making their businesses "compatible with a net-zero economy" by 2050. As assets have flowed in over the past 40 years, Sustainable Impact Investing has evolved. The discipline, originally known as Socially Responsible Investing, focused at first on excluding companies that conducted business in South Africa, or participated in industries such as tobacco, alcohol, and firearms. Performance of these initial strategies lagged, and the approach has been modified. Now, instead of merely identifying industries to avoid, the discipline promotes "sustainable" business practices across all industries that can have an "impact" on global issues such as climate, hunger, poverty, disease, shelter, and workers' rights.

Monday Tee Up: Let the Shopping Begin

The Vickers Top Buyers & Sellers is a daily report that identifies the five companies the largest insider purchase transactions based on the dollar value of the transactions as well as the five companies the largest insider sales transactions based on the dollar value of the transactions.

Friday's employment report will tell us if the job market is cooling enough to keep the Fed on the sidelines. We expect the Bureau of Labor Statistics (BLS) to announce that the unemployment rate remained at 3.8% in September and growth in nonfarm payrolls decelerated to 150,000 from 187,000 in August. The three-month average is 150,000 as June and July payrolls were revised lower by a combined 110,000 jobs. We expect growth in average hourly earnings to remain at 4.3% and average hours worked to be flat at 34.4 hours. The United Automobile Workers strike, which started on September 15, should not affect the September payrolls because the workers were not out of for the entire reference pay period used for classification. The Current Employment Statistics (CES) Strike Report from the BLS, normally released on the Friday before the jobs report, is a little known, but valuable resource on strikes involving 1,000 or more workers during a reference period. The number of job openings has declined from 12 million when the Fed started tightening in March 2022 to 8.8 million in July. We expect to see a continuation of this trend tomorrow when the BLS releases the Job Openings and Turnover Survey (JOLTS) for August. We also expect the JOLTS report to show that the number of people leaving jobs voluntarily (quits) is continuing to decline based on the perception that a tighter job market is making it harder to trade up to a better position. An indication of a more-balanced job market, where the Fed can stop raising rates, may be if the ratio of job openings to unemployed, which peaked at 2.0 in March 2022, continues to ease from 1.5 in July.

Stocks rose on Thursday morning. Headline PPI rose 0.7% in August, up from 0.4% in July and higher than expected. Final demand goods prices rose 20% and was the largest contributor to the increase in August, with services rising 0.2%. In final demand goods prices, energy was the key driver, surging 10.5%. These latest readings bring the annualized headline PPI to 1.6% and core PPI to 3.0%, up from 0.8% and 2.7%, respectively. The European Central Bank moved to raise its interest rate 25 basis-points to 4% today, taking it to an all-time high. The Dow rose 0.7%, the S&P 500 was up 0.6%, and the Nasdaq rose 0.7%. Crude oil traded at $90 per barrel, while gold fell $2.50 to $1930 per ounce.

Stocks were largely flat on Friday morning, steadying after several days of sharp losses, as investors continued to focus on economic weakness in China, rising bond yields, and the Fed's next interest rate decisions. The CME Group's FedWatch Tool currently projects just a 10% chance of a rate hike in September, but a higher 30% chance of an increase at the November meeting. However, based on recent economic data and the FOMC meeting minutes earlier this week, many investors also expect the Fed to delay any rate cuts and leave high current rates in place for longer in 2024. The Dow rose 0.2%, the S&P was flat, and the Nasdaq fell 0.2%. Crude oil rose slightly to $81 per barrel, while gold rose $6 to $1922 per ounce.

Consumer confidence trends are starting to improve. The Conference Board's Consumer Confidence Index increased for the second month in a row in June, to 117.0 (1985=100) from 109.7 in May. The index was a cycle-high 133 in February 2020, but plunged to 85 by August 2020; right now the reading is near the midpoint of those two poles. Meanwhile, the University of Michigan, which also tracks consumer sentiment, recently reported that its July reading on consumer sentiment was up 11% month-over-month, but at 71.6 remains well below February 2020's comparable reading above 100. What's next for the all-important consumer sector? Well, low unemployment has helped fuel demand over the past few quarters. But spending also has been propped by the government's stimulus program, which has come to an end, and consumer balance sheets have deteriorated after 11 consecutive quarters of growth in personal consumption expenditures. The combination of pandemic-related factors (such as economic shutdowns and aggressive fiscal spending) resulted in a sharp improvement in household finances in 2020. Indeed, the stimulus programs initially lifted personal savings to almost $6.5 trillion, according to the BEA. But that money has been spent, and then some: the total in personal savings has come down to $0.9 trillion as of 2Q23, below the average of $1 trillion in the decade prior to the pandemic. Stimulus funds spent, the all-important consumer sector finally may slow down in 2H23, particularly as student loan-payments resume.

Rapidly rising inflation in 2022 knocked stocks into a bear market. While growth strategies suffered the most, value strategies also declined. Even bond prices were lower last year. Stocks have recovered thus far in 2023, but gains have been largely driven by only a handful of high-tech companies. Inflation remains high and the Fed continues to raise rates. Is a recession in the offing? With all the uncertainty, is it time for investors to cash in their chips? We note that investors exit the stock market at their own peril, as long-term returns from equities consistently have outpaced long-term returns from other asset classes, such as fixed income and cash. Argus believes that Min Vol is an all-weather strategy that is timely in any investing climate. Academic literature and, more to the point, returns history, indicate that Min Vol can deliver market-matching returns on an absolute basis and superior returns on a risk-adjusted basis over various time periods.

Argus Research believes that ESG investing is a smart option to consider. Companies committed to ESG values typically reflect positive traits from management which often translate into better business. ESG (Environmental, Social, Governance) investing has come a long way and continues to grow. According to the Global Sustainable Investment Association, global assets under management in ESG strategies were $40 trillion in 2020, up from $23 trillion in 2016 and on track for $50 trillion by 2025. The discipline, originally known as Socially Responsible Investing, focused at first on excluding companies that conducted business in South Africa, or participated in industries such as tobacco, alcohol, and firearms. In time, the list of industries to avoid increased to include soft drinks, fast food, and oil and gas, among numerous others. But performance of these initial strategies lagged. Now, instead of merely identifying industries to avoid, the discipline promotes "sustainable" business practices across industries that have an "impact" on global issues such as climate, hunger, poverty, disease, shelter, and workers' rights. At Argus Research, we track ESG progress at specific companies as part of our Management analysis -- one of the six points in our proprietary Six-Point System for fundamental research. In addition to reviewing and measuring the ESG proclamations from companies under coverage, we partner with an ESG research firm, JUST Capital, and leverage its analysis and insights. JUST Capital's mission is to drive measurable corporate change to create a stakeholder-centric form of capitalism that reflects the priorities of the American public. JUST utilizes a combination of data-driven research and strategic engagement in an attempt to shift norms and practices in corporate America and the financial markets. JUST ESG Custom Ratings rank stocks in the Russell 1000 on criteria using a scale of 1-100. Drawing on the JUST Capital rankings, we have compiled focused lists of companies followed by Argus Research that are in position to have a "sustainable impact" on the environment, workplace, community, and marketplace. These firms have exemplary records of delivering on the bottom line, and also in improving the environment, contributing to community relations, and showing respect for their employees. We also have a theme model portfolio based in part on ESG criteria. To build the Argus U.S. ESG Theme Model Portfolio, we apply financial concepts such as industry diversification, income generation, risk reduction, and growth at a reasonable price to our various lists. In addition, all stocks must be on the Argus BUY list. For more on JUST Capital's criteria, please visit the JUST Capital website, www.justcapital.com. For more information on the Argus companies, please see our Analyst Reports at www.argusresearch.com. Here are some of the stocks that are currently in the Argus U.S. ESG Theme Model Portfolio.

Rapidly rising inflation in 2022 knocked stocks into a bear market. While growth strategies suffered the most, value strategies also declined. Even bond prices were lower last year. Stocks have recovered so far in 2023, but gains have been driven largely by only a handful of high-tech companies. Inflation remains high and the Fed continues to raise interest rates. Is a recession in the offing? With all the uncertainty, is it time for investors to cash in their chips? Perhaps not yet. We note that investors exit the stock market at their own peril, as long-term returns from equities consistently have outpaced long-term returns from other asset classes, such as fixed income and cash. As well, those returns are from eras when the 10-year Treasury bond yield was much higher than the current 3.8% level. So what's a potential equity strategy for investors amid all the uncertainty? Argus believes that Min Vol is an all-weather strategy that is timely in any investing climate. Academic literature and, more to the point, returns history indicate that Min Vol can deliver market-matching returns on an absolute basis and superior returns on a risk-adjusted basis over various time periods. We have designed a portfolio of companies followed by Argus Research analysts that are BUY-rated and have impressive Min Vol characteristics of low beta, high yield, high market cap, strong balance sheets, and low risk profiles. Some of the stocks featured in the portfolio are listed below.

We had some reversion to the mean last week, although it was just a blip on the broader radar. The Nasdaq 100 gave back 0.9% and the Nasdaq lost 0.6%, while the Russell 2000 gained 1.5%, the S&P 500 Equal Weight tacked on 1.4%, and the S&P MidCap 400 added 1.2%. The NYSE Fang Plus Index (10 stocks with equal weighting, including AAPL, MSFT, NVDA, GOOGL, TSLA) fell 3.3%. But don't fret, the index is still up 74% in 2023.

Argus has published its latest Portfolio Selector, which features its popular Focus List. Each month, Director of Research Jim Kelleher, CFA, surveys the team of Argus Research industry analysts for their timeliest recommendations out of the company's fundamental universe of approximately 500 stocks. The Focus List typically includes 30 stocks: turnover is high, as Jim typically adds three or four new stocks per month. Below are the latest additions, all of which are rated BUY at Argus.

The Portfolio Selector features the Argus Focus List, a group of 30 "best idea" stocks generated and regularly updated by Argus' analysts and investment policy committee. It also includes the director of research’s monthly investment strategy column, stock recommendations and sector picks, economic forecasts, and an asset allocation model. This month, the Focus List additions are Tesla Inc (TSLA); Walmart Inc (WMT); Merck & Co Inc (MRK); Adobe Inc (ADBE) and the Focus List deletions are DraftKings Inc. (DKNG); Dell Technologies Inc (DELL); Thermo Fisher Scientific Inc. (TMO); Coca-Cola Co (KO).

Monday Tee Up: No Summer Doldrums

The U.S. economy generated 209,000 new jobs in June, above our forecast of 190,000 but well below May’s revised 306,000. The unemployment rate declined to 3.6% from 3.7% in May. Following a pause in interest rate increases at its June 13-14 meeting, Fed Chair Jerome Powell and other central bank officials have suggested that monetary policy may not be restrictive enough to reduce inflation to 2%. Average hourly earnings increased $0.12 from the prior month and are now 4.4% higher year-over-year, an unchanged pace from May. The labor force participation rate was unchanged at 62.6%. In June, job gains continued in government, healthcare, construction, and social assistance. Employment was little changed in mining, quarrying, and oil and gas extraction; manufacturing; wholesale trade; information; financial activities; and other services. Job gains in April and May were revised lower by 110,000 jobs. The number of job openings in May decreased by 496,000, but demand for workers is still strong with 9.8 million openings, according to a separate BLS report yesterday. The number of unemployed at 6.0 million in June was little changed from May. After the jobs report, stock futures were slightly higher, and the yield on the 10-year Treasury rose by 3 basis points. Before this morning's release, futures contracts suggested a 95% probability that the Fed would raise its target range by 25 basis points to 5.25%-5.50% at its July 26 meeting and a 26% chance of an additional 25-basis-point increase on September 23. After this morning's release, a July rate hike remains almost certain. The probability of a September rate hike to 5.5%-5.75% dropped slightly to 23%.

There has been a massive sentiment shift to optimism since the end of April (from deep pessimism late last year). The pop in optimism also occurred early this year, but dissipated in March. The cavalry of bearish strategists, most of which hadn't budged from pessimism about 2023 and 2024, are fumbling over each other and raising their S&P 500 (SPX) targets and their stock allocations. That's what higher prices do -- and when many cave at the same time, the market sometimes takes a break.

In this edition, railroads on an appropriately valued track; get ready to charge your lithium portfolio; initiating coverage of Penn Entertainment; and Deere & Co., Walmart and Farfetch.

Sustainable Impact Investing, or ESG investing, is gaining traction not only with Argus Research clients but also with the global investment community. BlackRock CEO Lawrence Fink, who oversees approximately $9 trillion in assets, announced in January 2020 that his firm would be investing in companies that are making progress on sustainability. He doubled down in his January 2021 letter, calling on company managements to disclose their plans for making their businesses "compatible with a net-zero economy" by 2050. As assets have flowed in over the past 40 years, Sustainable Impact Investing has evolved. The discipline, originally known as Socially Responsible Investing, focused at first on excluding companies that conducted business in South Africa, or participated in industries such as tobacco, alcohol, and firearms. Performance of these initial strategies lagged, and the approach has been modified. Now, instead of merely identifying industries to avoid, the discipline promotes "sustainable" business practices across all industries that can have an "impact" on global issues such as climate, hunger, poverty, disease, shelter, and workers' rights.

The Labor Department's nonfarm payrolls report for May 2023 will be released on Friday. This report provides the first (and most-important) view of the previous month's economic activity. This month's employment numbers will be parsed carefully because they may hold the key to Fed policy and stock returns. The market is evenly divided on what the Federal Open Market Committee will do when it meets on June 14. Futures contracts suggest a 51% probability that the Fed will hold the target rate at 5.0%-5.25% and a 49% chance that the central bank will raise the target to 5.25%-5.5%. Signs of strong job creation and wage growth on Friday could push the Fed to deliver a further dose of monetary medicine. Higher rates are a risk to the banking, housing, and manufacturing sectors that are feeling side effects from 10 doses to date. In April, the economy added a stronger-than-expected 253,000 new jobs. The 3.4% unemployment rate matched the lowest level since 1969. Finally, there are still 9.6 million job openings available. Our forecast anticipates that 175,000 new positions were created in May. This reflects our expectation for a healthy-but-cooling job market. Initial jobless claims have risen in 2023 and Challenger, Gray & Christmas reported that U.S.-based employers announced 66,995 job cuts in April, up 176% from April 2022. We look for the unemployment rate to tick up to 3.6% (as more workers re-enter the workforce) and for average hourly wage gains to rise 4.4%.

Stocks gave up early gains on Friday morning on news of a setback in the debt ceiling negotiations between the Biden administration and House Republicans. Representative Garret Graves of Louisiana, the lead negotiator on the Republican side, said that it was time to 'press pause' because the negotiations were not productive. On the earnings front, Deere & Co. reported stronger-than-expected fiscal 2Q EPS and raised its full-year guidance. On the negative side, footwear retailer Foot Locker plunged 27% after reporting disappointing 1Q results and cutting its sales and earnings forecasts. The Dow fell 0.3%, the S&P 0.1%, and the Nasdaq 0.2%. Crude oil fell to $71.50 per barrel, while gold traded near $1982 per ounce.

As discussed in this space last week, the volume of weekly insider transactions reported by Vickers Stock Research now reflects the just-beginning earnings season. Indeed, volume is light as insiders are broadly prohibited from trading stock during this time. But by way of a recap, insiders prepared for the trading hiatus by taking a bullish stance -- which was not the case heading into the last earnings period. And during the recent bullish wave from insiders, stocks responded accordingly -- with the S&P 500 up over 6% since mid-March. While the relevance of current insider-transaction data is softened by the current light volume, we remain encouraged by the sentiment trend that has been in place over the past month.

The Vickers Top Buyers & Sellers is a daily report that identifies the five companies the largest insider purchase transactions based on the dollar value of the transactions as well as the five companies the largest insider sales transactions based on the dollar value of the transactions.

Stocks were flat on Wednesday morning, pausing after Tuesday's sharp selloff. Investors weighed hawkish comments from Fed officials and awaited the release of the latest FOMC meeting minutes for more clues about the Fed's plans for additional rate hikes. On the earnings front, Palo Alto Networks rose 11% after the cybersecurity company posted strong fiscal 2Q results and raised its full-year earnings guidance. The Dow rose 0.1%, and the S&P and the Nasdaq were flat. Crude oil fell more than 2% to $74.50 per barrel, while gold rose slightly to $1844 per ounce.

The Labor Department's Nonfarm Payrolls report for January 2023 will be released at 8:30 a.m. ET on Friday, February 3, 2023. This report is always eagerly awaited by investors, as it typically provides the first -- and most-important - view of the previous month's economic activity. This month's report will be parsed carefully amid concerns that the U.S is headed toward a recession, with the Federal Reserve focused on slowing the economy to reduce inflation. Recent jobs reports indicated that the employment environment remains healthy and that the Fed still has a chance to steer the economy toward a soft landing. Last month, according to the Labor Department (DOL), the economy added 223,000 new jobs and the unemployment rate declined slightly to 3.5% (near cyclical lows). The DOL also noted that there are still 10.5 million job openings available. This month, our Nonfarm Payrolls forecast anticipates that 185,000 new positions were created in January. Our estimate is bolstered by recent declines in initial unemployment claims, tempered by layoff announcements in Technology and other sectors. Indeed, according to Challenger, Gray & Christmas, U.S.-based employers announced 43,651 job cuts in December 2022, a 129% increase from the 19,052 cuts announced in December 2021. We look for the unemployment rate to tick up to 3.6% (as more workers re-enter the workforce) and for average hourly wage gains of approximately 4.8%. Many forecasters are calling for a recession in 2023. If that is going to be the case, we may see the unemployment rise toward 5.0% in the months ahead.

Stocks wavered on Friday morning following new inflation data and earnings reports from Intel and American Express, but have turned positive as of this writing. The Commerce Department said that its personal consumption expenditures price index - the Fed's preferred measure of inflation - rose 5.0% from the prior year in December, slowing from 5.5% growth in November and continuing a recent downward trend. Excluding volatile food and energy costs, the core PCE rose 4.4% from the prior year, down from 4.7% in November and in line with the consensus estimate. Intel shares fell about 8% after the chipmaker posted disappointing 4Q results and offered weak guidance for the current first quarter. American Express jumped 12% despite below-consensus earnings, as investors focused on management's strong full-year guidance.

Rapidly rising inflation 2022 knocked stocks into a bear market. While growth strategies suffered the most, value strategies also declined. Even bond prices were lower last year. Volatility, which has dropped from the highs of 2020, still has not returned to pre-COVID levels. Is it time for investors to cash in their chips? We note that investors exit the stock market at their own peril, as long-term returns from equities consistently have outpaced long-term returns from other asset classes, such as fixed income and cash. As well, those fixed-income returns are from eras when the 10-year Treasury bond yield was much higher than the current 3.5% level. So what's a potential equity strategy for investors amid all the uncertainty? Argus believes that Min Vol is an all-weather strategy that is timely in any investing climate.

We anticipate that activity in the consumer sector, which was the primary driver of GDP growth in 2022, will slow as the Federal Reserve continues to raise interest rates and companies keep cutting jobs. The sector is all-important to the economy and accounts for about two-thirds of GDP. The main driver to the consumer sector is the jobs market. While the domestic employment environment is in better shape than it was two years ago, it is starting to show signs of deterioration. Though the unemployment rate is 3.5%, it seems headed inevitably higher in the wake of layoff announcements from high-profile companies such as Microsoft, Alphabet, Amazon.com, Salesforce.com, Goldman Sachs, and Morgan Stanley. Meanwhile, consumer balance sheets appear to be weakening somewhat after multiple quarters of spending growth. A combination of pandemic-related factors -- such as economic shutdowns and aggressive fiscal spending -- resulted in a sharp improvement in household finances in 2020. Indeed, the stimulus program initially lifted personal savings to almost $5 trillion. But that money has been spent, and then some: the personal savings level has come down to $625 billion, below the $1 trillion average level in the decade prior to the pandemic. With savings tapped, a slowdown in the all-important consumer sector seems likely in 1H23. Here are some of our top "cautious consumer" stocks for 2023.

Sustainable Impact Investing, or ESG investing, is gaining traction not only with Argus Research clients but also with the global investment community. BlackRock CEO Lawrence Fink, who oversees approximately $9 trillion in assets, announced in January 2020 that his firm would be investing in companies that are making progress on sustainability. He doubled down in his January 2021 letter, calling on company managements to disclose their plans for making their businesses "compatible with a net-zero economy" by 2050. As assets have flowed in over the past 40 years, Sustainable Impact Investing has evolved. The discipline, originally known as Socially Responsible Investing, focused at first on excluding companies that conducted business in South Africa, or participated in industries such as tobacco, alcohol, and firearms. Performance of these initial strategies lagged, and the approach has been modified. Now, instead of merely identifying industries to avoid, the discipline promotes "sustainable" business practices across all industries that can have an "impact" on global issues such as climate, hunger, poverty, disease, shelter, and workers' rights.

The Vickers Top Buyers & Sellers is a daily report that identifies the five companies the largest insider purchase transactions based on the dollar value of the transactions as well as the five companies the largest insider sales transactions based on the dollar value of the transactions.

Stocks were mostly lower on Wednesday morning as investors weighed new retail sales data along with a weak earnings report from Target. The Commerce Department said that U.S. retail sales rose 1.3% from the prior month in October, above the Reuters consensus forecast of 1.0% growth and up from a flat reading in September. Target shares dropped 13% after the company reported much weaker than expected 3Q earnings, reflecting the impact of lower consumer discretionary spending. The Dow rose 0.1%, the S&P fell 0.5%, and the Nasdaq fell 1.3%. Crude oil fell more than 2% to $85 per barrel, while gold traded at $1778 per ounce.

October is known as 'the bear killer,' and the first trading day of the month sure felt that way (although massive rallies are common during bear markets, as seen since March). There have been 11 post-WWII bears that ended in October: 1946, 1957, 1960, 1962, 1966, 1974, 1987, 1990, 1998, 2002, and 2011 (19.4% on closing basis, over 20% on an intraday basis). We do not count 2001 (as do others) because it was not the end of that bear market based on the September low.

In this edition, Big-Box Retailers' big Outlooks, Inflation Reduction Act's Winners and Losers, Initiating Coverage on BYD, and General Motors, Kohl's, and Tapestry.

Stocks were mostly higher on Thursday morning following new weekly employment data and mixed results from major retailers. Kohl's shares fell more than 5%, despite above-consensus 2Q EPS, after the company cut its full-year sales and earnings forecasts. On the positive side, BJ's Wholesale Club reported better-than-expected results and raised its full-year guidance, sending the shares up 8%. The Dow fell 0.1%, the S&P rose 0.2%, and the Nasdaq rose 0.4%. Crude oil rose 2% to $90 per barrel, while gold fell $4 to $1773 per ounce.

Rapidly rising inflation in 2022 has knocked the stock market into a bear market. While growth strategies have suffered the most, value strategies also have declined. Even year-to-date bond prices are lower. Volatility, which has dropped from the highs of 2020, still has not returned to pre-COVID levels. Is it time for investors to cash in their chips? We note that investors exit the stock market at their own peril, as long-term returns from equities consistently have outpaced long-term returns from other asset classes, such as fixed income and cash. As well, those returns are from eras when the 10-year Treasury bond yield was much higher than the current 3.0% level. So what's a potential equity strategy for investors amid all the uncertainty? Argus believes that Min Vol is an all-weather strategy that is timely in any investing climate. Academic literature and, more to the point, returns history, indicate that Min Vol can deliver market-matching returns on an absolute basis and superior returns on a risk-adjusted basis over various time periods.

Stocks fell on Tuesday morning as investors weighed a profit warning from Walmart along with strong earnings from General Electric and McDonald's. Walmart shares fell 8% after the company cut its 2Q and full-year earnings forecasts, citing the impact of food and fuel inflation on consumers' discretionary spending. The Dow fell 0.4%, the S&P 0.9%, and the Nasdaq 1.8%. Crude oil rose slightly to $97 per barrel, while gold fell $2 to $1717 per ounce.

Rapidly rising inflation in 2022 has knocked the stock market into a bear market. While growth strategies have suffered the most, value strategies also have declined. Even bond prices are lower year-to-date. Volatility, which has dropped from the highs of 2020, still has not returned to pre-COVID levels. Is it time for investors to cash in their chips? Perhaps not yet. We note that investors exit the stock market at their own peril, as long-term returns from equities consistently have outpaced long-term returns from other asset classes, such as fixed income and cash. As well, those returns are from eras when the 10-year Treasury bond yield was much higher than the current 3.0% level. So what's a potential equity strategy for investors amid all the uncertainty? Argus believes that Min-Vol is an all-weather strategy that is timely in any investing climate. Academic literature and, more to the point, returns history indicate that Min-Vol can deliver market-matching returns on an absolute basis and superior returns on a risk-adjusted basis over various time periods. We have designed a portfolio of companies followed by Argus Research analysts that are BUY-rated and have impressive Min-Vol characteristics of low beta, high yield, high market cap, strong balance sheets, and low risk profiles. Some of the stocks featured in the portfolio are listed below.

While the major stock indices were mixed to a bit lower on Wednesday, we think it was a win for the bulls following a very hot June CPI print of 9.1%. Today, stocks will again be tested with the June PPI report at 8:30 am ET. On Wednesday, the S&P 500 fell to a low of 3,759 early on, down 1.6% -- but cooler heads prevailed, and the index finished with a 0.5% decline. The Nasdaq and the Nasdaq 100 fell only 0.2%.

Maybe it's a good idea to switch to a four-day week and just skip Mondays. That said, we have played this game before -- with a day or a few days of price strength that are followed by new corrective/bear-market lows. The S&P 500 finished on Tuesday with a whopping 2.5% gain, rising 90 points. That sounds great but...one-day gains of at least 1.5% occurred 10 times during the initial phase of the bear market (from January until March) and we have seen the same thing nine times during the second part of the bear market (that started in April). Since January, we have witnessed three fairly strong attempts to break the downtrend -- and all failed miserably.

Stocks plunged on Friday morning on further signs of accelerating inflation and concerns about the Fed's response. In a widely anticipated release, the Labor Department said that consumer prices rose at an 8.6% annual rate in May, up from 8.3% growth in April and above the consensus forecast of 8.3%. The reading was the highest in more than 40 years. The core CPI, excluding food and energy, rose 6.0% from the prior year, above the consensus of 5.9% growth. The Dow fell 2.1%, the S&P 2.5%, and the Nasdaq 3.1%. Crude oil fell to $121 per barrel, while gold traded near $1851 per ounce.

Sustainable Impact Investing, or ESG investing, is gaining traction not only with Argus Research clients but also with the global investment community. BlackRock CEO Lawrence Fink, who oversees approximately $9 trillion in assets, announced in January 2020 that his firm would be investing in companies that are making progress on sustainability. He doubled down in his January 2021 letter, calling on company managements to disclose their plans for making their businesses "compatible with a net-zero economy" by 2050. As assets have flowed in over the past 40 years, Sustainable Impact Investing has evolved. The discipline, originally known as Socially Responsible Investing, focused at first on excluding companies that conducted business in South Africa, or participated in industries such as tobacco, alcohol, and firearms. Performance of these initial strategies lagged, and the approach has been modified. Now, instead of merely identifying industries to avoid, the discipline promotes "sustainable" business practices across all industries that can have an "impact" on global issues such as climate, hunger, poverty, disease, shelter, and workers' rights.

ESG Stocks

Stocks continued to fall on Friday morning after giving up early gains. The selloff was led by the Consumer Discretionary and Industrial Sectors, though all sectors were down. The S&P 500 remained on track for its seventh straight weekly loss. On the earnings front, Deere shares fell more than 11% despite the company's better-than-expected fiscal 2Q earnings and higher full-year guidance. The Dow fell 0.7%, the S&P 0.7%, and the Nasdaq 0.9%. Crude oil rose slightly to $113 per barrel, while gold traded near $1844 per ounce.

Earnings, Economy Roll along through Market Wreckage

Monday was yet another washout day, as the major indices lost 3% to 4% -- with the heaviest losses in Energy, Real Estate, Consumer Discretionary, Technology, Basic Materials, Healthcare, and Communication Services. More of the same.

Stocks fell again on Friday morning amid continued concerns about the deepening crisis in Ukraine and the impact of approaching Fed rate hikes. Housing data was positive. The National Association of Realtors said that U.S. existing home sales rose 6.7% in January to an annualized 6.5 million, well above the Bloomberg consensus forecast of 6.1 million. The Dow fell 0.4%, the S&P 0.5%, and the Nasdaq 1.0%. Crude oil fell to $91 per barrel, while gold traded near $1895 per ounce.

The onset of the coronavirus in 2020 knocked stocks into a bear market. Though equities recovered, the U.S. economy is about to slow down and COVID-19 cases are rising again as virus variants spread. Volatility, which has dropped from the highs of 2020, still has not returned to pre-COVID levels. Daily prices can swing wildly, as they did three times in 2021 when stocks dropped 4%-5% in a matter of a few days. Is it time for investors to cash in their chips? We note that investors exit the stock market at their own peril, as long-term returns from equities consistently have outpaced long-term returns from other asset classes, such as fixed income and cash. As well, those returns are from eras when the 10-year Treasury bond yield was not sub-2.0%. So what's a potential equity strategy for investors amid all the uncertainty? Argus believes that Min Vol is an all-weather strategy that is timely in any investing climate. Academic literature and, more to the point, returns history indicate that Min Vol can deliver market-matching returns on an absolute basis and superior returns on a risk-adjusted basis over various time periods.

Argus Senior Retail Analyst Christopher Graja, CFA, is forecasting a robust year for the retail sector this holiday season. His forecast calls for 7.5% year-over-year growth, which would be the second-highest growth rate in the past 20 years. Growth in 2020 was 8.2%, the 10-year average is 3.9%, and the five-year average is 4.4%. Our forecast is on the same basis as the National Retail Federation forecast (for November and December, and excluding auto dealers, gas stations, and restaurants). Our sub-component forecasts are General Merchandise +7%, Nonstore +8.5%, and Food & Beverage (mostly grocery stores) +4%. We think some 2021 sales have been pulled forward to October, as consumers started early because they are concerned about supply-chain disruptions. Our top retail picks are innovative companies that sell unique merchandise, have excellent tools for analyzing e-commerce and developing marketing plans, and maintain a good balance of physical stores and e-commerce. This season we expect to see consumers shopping at fewer retailers. That should help Amazon, Walmart, Home Depot, Lowe's, Costco, and Target. These companies did well during the worst of the pandemic and are reinvesting profits to improve efficiency and gain share. In addition, their clout with suppliers and shipping partners helps them navigate supply-chain problems.

Argus Senior Retail Analyst Christopher Graja, CFA, is forecasting a robust year for the retail sector this holiday season. His forecast calls for 7.5% year-over-year growth, which would be the second-highest growth rate in the past 20 years. Growth in 2020 was 8.2%, the 10-year average is 3.9%, and the five-year average is 4.4%. Our forecast is on the same basis as the National Retail Federation forecast (for November and December, and excluding auto dealers, gas stations, and restaurants). Our sub-component forecasts are General Merchandise +7%, Nonstore +8.5%, and Food & Beverage (mostly grocery stores) +4%. We think some 2021 sales have been pulled forward to October, as consumers started early because they are concerned about supply-chain disruptions. Our top retail picks are innovative companies that sell unique merchandise, have excellent tools for analyzing e-commerce and developing marketing plans, and maintain a good balance of physical stores and e-commerce. This season we expect to see consumers shopping at fewer retailers. That should help Amazon, Walmart, Home Depot, Lowe's, Costco, and Target. These companies did well during the worst of the pandemic and are reinvesting profits to improve efficiency and gain share. In addition, their clout with suppliers and shipping partners helps them navigate supply-chain problems.

Stocks were mixed on Friday morning after Austria reimposed a full lockdown to combat soaring cases of the Delta variant and the German government contemplated similar measures. Investors also weighed prospects for the Biden administration's social spending and climate change bill, which was narrowly approved by the House but faces a difficult path in the Senate. The Dow fell 0.7%, the S&P fell 0.1%, and the Nasdaq rose 0.5%. Crude oil fell nearly 3% to $77 per barrel, while gold rose slightly to $1863 per ounce.