The stock market is in a rough patch for the first time since the July to October period of last year. After the major indices hit their secondary highs on April 11 (the Nasdaq hit its all-time high that day), is has pretty much been 'down periscope.' Out of those trading six days, the S&P 500 (SPX), Nasdaq, and Nasdaq 100 (QQQ) have fallen between 0.9% and 2.1% on three (SPX) or four of those days. Despite the very steep downside slope of the Big 3, NYSE breadth actually bottomed on April 12 and 15, illustrating that the selling has been concentrated in Big Tech and the many stocks that were overly extended on a momentum basis.

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.

Monday Tee Up: A Huge Earnings Week

Many investors are getting a nice holiday present this December, as 2023 is closing out with a burst higher for stocks. The gains have been swift in the last month or so and are spread across sectors and market caps. Yet some companies have not joined in the party - and we think they may present opportunities. We used the Argus screening tool to generate a list of companies that have clean balance sheets and a proven track record for profits. We also like the management teams and strategies at these companies. For our list, we identified 11 BUY-rated large- or mega-cap companies across numerous industries that are selling at more than 25% below their 52-week highs. The list includes stocks in multiple sectors.

U.S. equites finished lower on Thursday while Treasury yields rose as investors digested comments by Fed Chair Powell. Mr. Powell warned that the central bank may need to hike rates as inflation is still too high but 'the committee is proceeding carefully,' hinting that rates could hold steady in November. The 10-year Treasury yield reached 5% for the first time since 2007. The S&P 500 closed 0.9% lower, the Dow was down 0.8% and the Nasdaq lost nearly 1%. Crude oil rose above $90 per barrel and gold was up to $1985 per ounce.

Stocks rose modestly on Friday morning as investors weighed more 2Q earnings reports and looked ahead to the Fed's interest rate decision next week. American Express shares fell, despite better-than-expected earnings, on concerns about rising loss provisions and slower card spending in the second half of the year. CSX also fell after the railroad operator reported second-quarter revenue and earnings that were down from the prior year. The Dow rose 0.2%, the S&P 0.4%, and the Nasdaq 0.3%. Crude oil rose 1% to $76.50 per barrel, while gold traded near $1961 per ounce.

This pick list highlights constituents of the Morningstar US Mid Cap Index that we believe offer investors the best risk-adjusted return prospects. The market capitalization range for U.S. mid-caps typically falls between $1 billion and $8 billion and represents 20% of the total capitalization of the U.S. equity market.

Citizens Financial Group is a bank holding company headquartered in Providence, Rhode Island. Its two primary business segments are consumer banking and commercial banking. Citizens offers a mix of retail and commercial products including capital markets and wealth options. The bank has over 1,000 branches in 14 states, although it is primarily concentrated in the Northeast. It has over $220 billion of total assets.

Stocks fell on Thursday amid mixed earnings reports and more signs of a slowing economy. The Conference Board said that its Leading Economic Index fell 1.2% in March to 108.4, the lowest level since November 2020. Housing market data was also weak, as existing home sales fell a greater-than-expected 2.4% in March, and weekly unemployment benefit claims pointed to a gradually tightening labor market. On the earnings front, Tesla shares dropped nearly 10% after the automaker reported disappointing first-quarter earnings and raised investor concerns about price cuts and margin pressure. AT&T also fell sharply after reporting slower subscriber growth and weak free cash flow. The Dow fell 0.33%, the

California-based SVB Financial Group was taken over by regulators last Friday due to inadequate liquidity and insolvency; SIVB equity shareholders have been wiped out. The collapse has reverberated on Wall Street in a sharp downturn in bank stocks as investors worry about a contagion impact on the banking industry. We believe the reaction has been overblown. Silicon Valley Bank was a special situation in two ways. First, deposits at the bank accounted for about 90% of funding, versus 65% for the average bank, leaving the bank susceptible to funding shortfalls from a relatively small base of depositors. As well, the bank was deeply concentrated in holding deposits for technology start-ups, which have been unable to access the capital markets due to a downturn in capital raising and were thus funding operations by draining their deposits from prior fund raisings. While depositors with more than the FDIC cap of $250,000 will face uncertain timing on recovery of funds, we view deposits as a zero sum game. Funds pulled from one bank will be allocated to another. Banks routinely face interest-rate cycles and hold a large amount of fixed-income assets, sometimes at gains, other times at losses. But default risk is really non-existent and gains/losses are zero if held to maturity. SVB's issue was having received a large amount of deposits and having invested them when rates were very low, and then being asked for those deposits back after rates moved considerably higher -- leaving it with short-term losses. Larger banks have far better distribution among funding sources (such as a greater number of depositors and short-term borrowings). Larger banks also are subject to stringent stress tests on a range of severe economic scenarios and have abundant capital requirements. Smaller banks with large exposure to single sectors may be at risk, so we would focus on larger banks in this risk-off environment. Here is a list of BUY-rated Financial sector stocks in Argus' universe of coverage that fell sharply last week and offer value, in our opinion.

Fourth-Quarter 2022 Review and Outlook for 2023

Inflation Marches on as the Market Tries to Stabilize

Stocks rose in volatile trading on Wednesday morning, extending Tuesday's rally, as major companies continued to report second-quarter results. Netflix shares rose 4% after the company posted above-consensus 2Q earnings and lower-than-expected subscriber losses. Johnson & Johnson shares edged higher following stronger-than-expected results, though management lowered its full-year sales and earnings guidance. The Dow rose 0.2%, the S&P 0.7%, and the Nasdaq 1.5%. Crude oil fell $2 to $102.50 per barrel, while gold fell $4 to $1707 per ounce.

Based on the trading week ended April 14, the song remains the same. Commodities are still king while stocks, especially higher-beta issues, remain in the dumpster. This shouldn't be a surprise, at least based on technical analysis. Indeed, intermediate- to longer-term trends and price momentum tend to go hand-in-hand for longer than most expect.

Stocks gave up strong early gains on Thursday, ending in the red after initially rallying on much better-than-expected economic data. The Commerce Department said that the U.S. economy expanded at a 6.9% rate in 4Q, up strongly from the prior quarter and well above the consensus forecast. On the employment front, first-time jobless claims fell to 260,000, down from the prior week and slightly below consensus. Continuing claims rose to 1.675 million, up from the prior week and above the consensus of 1.655 million. The Dow fell 0.02%, the S&P 0.54%, and the Nasdaq 1.40%. Crude oil rose slightly to $87 per barrel, while gold fell $34 to $1795 per ounce.

The Federal Reserve wrapped up its latest Open Market Committee and, as expected, opened the door to a series of federal funds rate hikes in the months ahead. In its statement after the meeting, the central bank commented that "with inflation well above 2% and a strong labor market, the Committee expects it will soon be appropriate" to raise the fed funds rate. The current fed funds target rate is 0.00%-0.25% and has been at this rock-bottom level since the early days of the pandemic. Fed Chairman Powell noted that the Fed's next meeting in March is likely to be the time the rate hikes begin. By then, the bank also will have completely wound down its asset-purchasing program. The market is concerned that the Fed is behind the curve on inflation. Since the meeting, bond yields have risen and stock prices have fallen. We expect the Fed to raise rates at least three times this year, before moving to the sidelines ahead of the mid-term elections. As well, we expect the Fed to lighten the balance sheet. The Fed currently owns $2.7 trillion in mortgage-backed securities. Once they decide to lighten their holdings, we expect them to reduce their MBS portfolio by $100 billion per month in a combination of principal pay downs and outright sales. That would take a little over two years. In addition, the duration of MBS' will extend, as homeowners with lower rates will have no incentive to refinance or prepay. This duration extension will also "help" steepen the curve.

The Federal Reserve wrapped up its Open Market Committee meeting on Wednesday and, as expected, decided it will start to pull back on some of the accommodative steps it used to guide the economy through the pandemic. Fed Chairman Powell announced the central bank will begin to reduce the monthly amount of its net asset purchases this month. This does not mean the Fed is slamming on the brakes completely. It has been purchasing $120 billion in Treasury and mortgage-backed bonds each month to help keep long-term interest rates low, and expects to reduce that total by $15 billion monthly until the program has been wound down next summer. Mr. Powell has not given any indication that a fed funds rate hike is near; we continue to expect the first increase later next year (the Fed's dot-plot forecasts call for as many as 6-7 fed funds rate hikes by the end of 2024). Chairman Powell commented that it was time to taper because of the "substantial further progress the economy has made." Notably, he did refer to inflation as "elevated" instead of his previous descriptive phrase of "transitory." His term as Fed chair ends in February. It is not clear whether he will be in his current position to see that inflation does indeed come under control.

The Federal Reserve wrapped up its Open Market Committee meeting on Wednesday and, as expected, decided it will start to pull back on some of the accommodative steps it used to guide the economy through the pandemic. Fed Chairman Powell announced the central bank will begin to reduce the monthly amount of its net asset purchases this month. This does not mean the Fed is slamming on the brakes completely. It has been purchasing $120 billion in Treasury and mortgage-backed bonds each month to help keep long-term interest rates low, and expects to reduce that total by $15 billion monthly until the program has been wound down next summer. Mr. Powell has not given any indication that a fed funds rate hike is near; we continue to expect the first increase later next year (the Fed's dot-plot forecasts call for as many as 6-7 fed funds rate hikes by the end of 2024). Chairman Powell commented that it was time to taper because of the "substantial further progress the economy has made." Notably, he did refer to inflation as "elevated" instead of his previous descriptive phrase of "transitory." His term as Fed chair ends in February. It is not clear whether he will be in his current position to see that inflation does indeed come under control.

Stocks were mixed on Thursday morning following earnings reports from IBM, Tesla, and Blackstone, and new employment data. IBM shares fell more than 7% after the company posted weaker-than-expected third-quarter revenue, while Tesla rose 3% after strong 3Q earnings, driven by record vehicle deliveries. On the employment front, the Labor Department said that first-time claims for state unemployment benefits fell to 290,000 for the week ended October 16, down from 296,000 a week earlier and below the consensus forecast of 297,000. The Dow fell 0.2%, the S&P was flat, and the Nasdaq rose 0.4%. Crude oil fell more than 1% to $82 per barrel, while gold traded near $1781 per ounce.

Small- and mid-cap stocks (SMID stocks) soared in 2019. They have underperformed large-caps over the past 12 months, but still may be in a better position to generate market-beating returns going forward. For one thing, SMID companies tend to focus on domestic markets, so their businesses could be poised to rebound more quickly once COVID-19 vaccines are more widely distributed and the domestic service economy recovers. As well, the prices of SMID stocks generally are lower than the prices of large-caps. That said, SMID stocks can be risky. Still, despite the risks, diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. Investors used to use a $2 billion market-cap threshold to define a small-cap stock and a $10 billion threshold for a mid-cap. The Russell 2000 index now includes numerous companies with market capitalizations above $15 billion. For our purposes, we use a threshold of $20 billion to define a SMID stock.

Value stocks are outperforming growth in 2021 for the first time since 2016. While a recent rally in growth stocks has narrowed the performance advantage for value in the year to date, an environment of historically low interest rates is one in which many investors are still searching for high levels of income -- which often can be found in value stocks. When we look for attractive high-yield/deep-value stocks at Argus, we look for low valuations on metrics such as price/earnings, price/sales, price/book, yield, and price/cash flow. We also look for companies with clean balance sheets, high levels of profitability, high-quality earnings, and experienced management teams. We seek to avoid companies in industries that are in secular decline, or with dividend yields that are so high that the payout is clearly at risk. Based on numerous requests from clients, we have designed a portfolio of companies that are BUY-rated at Argus Research, have a Financial Strength rating of at least Medium, and have a yield of 3.0% or higher.

Stocks fluctuated near breakeven on Thursday morning amid a new round of earnings reports and weekly employment data. The Labor Department said that first-time claims for state unemployment benefits rose to 419,000 for the week ended July 17, up from 368,000 a week earlier and above the consensus forecast of 350,000. The Dow fell 0.2%, the S&P was flat, and the Nasdaq rose 0.2%. Crude oil rose slightly to $71 per barrel, while gold traded near $1807 per ounce.

The central bank's balance sheet continues to grow, increasing to $7.8 trillion at the end of April from $7.3 trillion at the beginning of the year. The balance sheet consists of $4.9 trillion of U.S. Treasuries, $2.2 trillion in agency mortgage-backed securities, and another $700 billion in recently enacted programs (corporates, municipals, etc.). The Fed has continued to reiterate its commitment to purchase of "at least" $80 billion in U.S. Treasuries and $40 billion in mortgage-backed securities each month in order ensure a stable market. That said, the minutes released from the central bank's April meeting indicated that at least a few governors are willing to consider tapering buy-backs if upcoming economic data shows robust growth. This may well be a topic at the Fed's annual summer meeting in Jackson Hole, WY. At the short end of the curve, we don't anticipate the Fed will raise the federal funds rate until late 2022 or early 2023, at the earliest. On the flipside, we don't expect the Fed to lower interest rates below zero. Although that strategy has been implemented in some countries, it is not clear to Chairman Powell that the tool works. Further, he does not think it is appropriate in the U.S., given the country's dependence (corporations and investors) on the money market mutual fund segment of the market.

The stock market was slammed by not one, but two concerning inflation data points last week. The consumer price index for April jumped by 0.8% month-over-month and by 4.2% year-over-year. The producer price index was even more concerning, rising a lesser 0.6% month-over-month but a higher 6.2% year-over-year.

Often overlooked amid gyrations in the stock market is dividend income, which is an important element of total return. Between 1930 and 2012, dividend income accounted for 42% of total return of the S&P 500, according to Hartford Funds. And that's just the average. In some decades, dividends accounted for more than 50% of total returns and even 100% of returns. More recently, dividends have accounted for 15%-20% of returns. Still, in 2018, dividend payments softened the blow when most market indices declined as the Federal Reserve hiked rates. Not all dividends are created equal, though, and it is important to understand the difference between the two main categories: high-yield stocks and dividend-growth stocks.

The stock market moved higher last week as earnings season got underway and volatility continued its downward trend. Tech stocks performed roughly in line with blue chips. During Friday's session, the Dow Jones Industrial Average increased 165 points, or 0.48%. The S&P 500 was up 0.36%, and the Nasdaq Composite was up 0.10%. For the week, the DJIA was up 400 points, or 1.18%, the S&P 500 was up 1.37%, and the Nasdaq Composite was up 1.09%. Year-to-date, the DJIA is up 11.74%, the S&P 500 is up 11.43%, and the Nasdaq Composite is up 9.03%.

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 Lazard Ltd. (LAZ); KLA Corp. (KLAC); Silk Road Medical Inc (SILK); Pinterest Inc (PINS) and the Focus List deletions are Citizens Financial Group Inc (CFG); Moderna Inc (MRNA); Verizon Communications Inc (VZ); Western Digital Corp. (WDC).

Fourth-Quarter 2020 Summary & Market Outlook for 2021

Small- and mid-cap stocks (SMID stocks) surged in the past quarter. They also have outperformed large-caps over the past 12 months and may be in a better position to generate market-beating returns going forward. For one thing, SMID companies tend to focus on domestic markets, so their businesses could be poised to rebound more quickly once COVID-19 vaccines are widely distributed and the economy recovers. As well, the prices of SMID stocks are generally lower than the prices of large-caps. While SMID stocks can be risky, diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. We estimate that 20%-25% of the U.S. stock market's capitalization is comprised of SMID stocks. Investors used to use a $2 billion market-cap threshold to define a small-cap stock and a $10 billion threshold for a mid-cap. We note that the Russell 2000 index now includes numerous companies with market capitalizations above $15 billion. For our purposes, we use a threshold of $20 billion to define a SMID stock.

Small- and mid-cap stocks (SMID stocks) surged in the past quarter. They also have outperformed large-caps over the past 12 months and may be in a better position to generate market-beating returns going forward. For one thing, SMID companies tend to focus on domestic markets, so their businesses could be poised to rebound more quickly once COVID-19 vaccines are widely distributed and the economy recovers. As well, the prices of SMID stocks are generally lower than the prices of large-caps. While SMID stocks can be risky, diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. We estimate that 20%-25% of the U.S. stock market's capitalization is comprised of SMID stocks. Investors used to use a $2 billion market-cap threshold to define a small-cap stock and a $10 billion threshold for a mid-cap. We note that the Russell 2000 index now includes numerous companies with market capitalizations above $15 billion. For our purposes, we use a threshold of $20 billion to define a SMID stock.

We recently upgraded our rating on the Financial Services sector to Over-Weight. With market optimism rising on positive vaccine developments and the presidential transition, interest rates have started to move higher at the long end of the yield curve. We expect banks to benefit from wider net interest margins and lower loan-loss provisions as the economy normalizes, and insurance companies to generate higher income in their investment portfolios. The sector accounts for 10.4% of the S&P 500, down from 16.3% following the exclusion of REIT stocks. Over the past five years, the weighting has ranged from 9% to 17%. We think the sector should account for 11%-12% of diversified portfolios. The Financial sector is underperforming the market thus far in 2020, with a loss of 9.6%. It slightly outperformed in 2019, with a gain of 29.2%, and underperformed in 2018, with a loss of 14.7%. Here is how we use our analysts' Financial Services sector ideas in our Focus List and Model portfolios. All of the following stocks are rated BUY at Argus.

Growth stocks may be outperforming value, again, in 2020. But in an environment of historically low interest rates (and with the coronavirus and economic shutdown seemingly poised to keep them low for a long time), many investors are still searching for high levels of income, which can often be found in value stocks. Progress on COVID-19 vaccines has given a lift to some of the cyclical companies (energy companies and regional banks) that have lagged in recent quarters, and value stocks have kept up the pace with growth stocks in the past quarter. The current yield on the iShares Russell 1000 Value Index ETF is 2.5%, compared to the 1.0% current yield on the iShares Russell 1000 Growth Index ETF. This is not unimportant, as the current yield on the 10-year Treasury bond is 0.95%.

Last week, we examined insider-trading data from Vickers Stock Research and noted an unexpected pop in bearish insider sentiment -- albeit one based on relatively small trading volume as insiders are mostly sidelined during earnings season. We said that another week of bearish results would lead us to take a deeper dive and possibly develop a more defensive posture. Well, that second week has come.

Last week, we examined insider-trading data from Vickers Stock Research and noted an unexpected pop in bearish insider sentiment -- albeit one based on relatively small trading volume as insiders are mostly sidelined during earnings season. We said that another week of bearish results would lead us to take a deeper dive and possibly develop a more defensive posture. Well, that second week has come.

Our bond/stock model asset allocation now favors bonds over stocks (despite record-low yields) as the April-September rally in equities has lifted them to near-record price levels on very little EPS support. Our model takes into account current levels and forecasts of bond yields, inflation, stock prices, GDP and corporate earnings. Its output is expressed in terms of standard deviations to the mean, or sigma. The mean reading from the model, going back to 1960, is a modest premium for stocks of 0.06 sigma, with a standard deviation of 0.99. The current valuation level is 0.98 sigma premium for stocks -- an overvaluation, but within one standard deviation of normal. Generally, the model has done a good job of highlighting value. Stocks were very attractive compared to bonds in the late 1970s, when benchmark Treasury rates were in the high teens before heading lower over recent decades. The model indicated stocks were at a sharp premium to fair value prior to the "dot-com" crash of 2001 and at a premium prior to the Great Recession in 2007-2009. Starting in 2009, the model favored stocks -- another good call. As the chart shows, the market can manage with premiums and discounts for an extended time. Equity valuations will likely start to improve once corporate earnings begin to rebound.

Our bond/stock model asset allocation now favors bonds over stocks (despite record-low yields) as the April-September rally in equities has lifted them to near-record price levels on very little EPS support. Our model takes into account current levels and forecasts of bond yields, inflation, stock prices, GDP and corporate earnings. Its output is expressed in terms of standard deviations to the mean, or sigma. The mean reading from the model, going back to 1960, is a modest premium for stocks of 0.06 sigma, with a standard deviation of 0.99. The current valuation level is 0.98 sigma premium for stocks -- an overvaluation, but within one standard deviation of normal. Generally, the model has done a good job of highlighting value. Stocks were very attractive compared to bonds in the late 1970s, when benchmark Treasury rates were in the high teens before heading lower over recent decades. The model indicated stocks were at a sharp premium to fair value prior to the "dot-com" crash of 2001 and at a premium prior to the Great Recession in 2007-2009. Starting in 2009, the model favored stocks -- another good call. As the chart shows, the market can manage with premiums and discounts for an extended time. Equity valuations will likely start to improve once corporate earnings begin to rebound.

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 carry and Argus BUY rating.

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 carry and Argus BUY rating.

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 Texas Instruments Inc. (TXN); Dominos Pizza Inc (DPZ); Citizens Financial Group Inc (CFG); AGNC Investment Corp (AGNC) and the Focus List deletions are Allstate Corp (The) (ALL); Advanced Micro Devices Inc. (AMD); Equinix Inc (EQIX); CarMax Inc (KMX).

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 Texas Instruments Inc. (TXN); Dominos Pizza Inc (DPZ); Citizens Financial Group Inc (CFG); AGNC Investment Corp (AGNC) and the Focus List deletions are Allstate Corp (The) (ALL); Advanced Micro Devices Inc. (AMD); Equinix Inc (EQIX); CarMax Inc (KMX).

Stocks were mixed on Friday, echoing an unsettled week in which blue chip indexes rose but formerly hot growth stocks cooled off. Stocks were volatile all week as investors weighed steadily rising new COVID-19 case numbers and deaths against surprisingly strong economic data including retail sales, housing starts and permits, and industrial production. On Friday, The Dow Jones Industrial Average fell 63 points, or 0.2%. The S&P 500 and the Nasdaq Composite both increased 0.3%. For the full week, the Dow increased 2.3%. The S&P 500 was up 1.3%, and the Nasdaq fell 1.1%. Year-to-date, losses are now 6.5% for the Dow and 0.2% for the S&P 500, while the Nasdaq is up 17.1%. Over the past 52 weeks, the Dow is down 1.8%, while the S&P 500 is up 8.3%, and the Nasdaq is up 28.9%.

Stocks were mixed on Friday, echoing an unsettled week in which blue chip indexes rose but formerly hot growth stocks cooled off. Stocks were volatile all week as investors weighed steadily rising new COVID-19 case numbers and deaths against surprisingly strong economic data including retail sales, housing starts and permits, and industrial production. On Friday, The Dow Jones Industrial Average fell 63 points, or 0.2%. The S&P 500 and the Nasdaq Composite both increased 0.3%. For the full week, the Dow increased 2.3%. The S&P 500 was up 1.3%, and the Nasdaq fell 1.1%. Year-to-date, losses are now 6.5% for the Dow and 0.2% for the S&P 500, while the Nasdaq is up 17.1%. Over the past 52 weeks, the Dow is down 1.8%, while the S&P 500 is up 8.3%, and the Nasdaq is up 28.9%.

Our rating on the Financial Services sector is Market-Weight. The recent rush into safe-haven Treasuries has led to an historical collapse in interest rates, further pressuring banks' net interest margins. We also believe that speculative-grade debt, particularly in the Energy sector, faces viability risks if economic activity remains suppressed for an extended period. The sector accounts for 10.6% of the S&P 500, down from 16.3% following the exclusion of REIT stocks. Over the past five years, the weighting has ranged from 10% to 17%. We think the sector should account for 10%-12% of diversified portfolios. The Financial sector is underperforming the market thus far in 2020. Here is how we use our analysts' Financial Services sector ideas in our Focus List and Model Portfolios. All stocks are rated BUY.

Our rating on the Financial Services sector is Market-Weight. The recent rush into safe-haven Treasuries has led to an historical collapse in interest rates, further pressuring banks' net interest margins. We also believe that speculative-grade debt, particularly in the Energy sector, faces viability risks if economic activity remains suppressed for an extended period. The sector accounts for 10.6% of the S&P 500, down from 16.3% following the exclusion of REIT stocks. Over the past five years, the weighting has ranged from 10% to 17%. We think the sector should account for 10%-12% of diversified portfolios. The Financial sector is underperforming the market thus far in 2020. Here is how we use our analysts' Financial Services sector ideas in our Focus List and Model Portfolios. All stocks are rated BUY.

Over the past month in this space (where we examine weekly insider-sentiment data from Vickers Stock Research), we've hit on various themes that have developed during the COVID-19 stock swoon and partial recovery. Those have included 'expected behavior' from insiders; 'relative performance' in the progression of weekly insider sentiment; 'curves' that have evolved both in insider sentiment and in the progression of the virus; and 'neutral' insider sentiment as stocks came back fast from the depths of the (initial?) correction. This week, 'normalization' in sentiment is starting to set in -- even though much-improved stock prices are by no means normal yet.

Over the past month in this space (where we examine weekly insider-sentiment data from Vickers Stock Research), we've hit on various themes that have developed during the COVID-19 stock swoon and partial recovery. Those have included 'expected behavior' from insiders; 'relative performance' in the progression of weekly insider sentiment; 'curves' that have evolved both in insider sentiment and in the progression of the virus; and 'neutral' insider sentiment as stocks came back fast from the depths of the (initial?) correction. This week, 'normalization' in sentiment is starting to set in -- even though much-improved stock prices are by no means normal yet.

Stocks are barreling ahead this January, much as they did in January 2018 and January 2019. January 2019 ended well, while January 2018 did not. There are many positives in the outlook, including the strong consumer, an accommodative Fed, and growth in emerging markets. Newly positive in the outlook are trade breakthroughs, not only with China but also with our equally significant trading partners to the North (Canada) and south (Mexico).

Stocks are barreling ahead this January, much as they did in January 2018 and January 2019. January 2019 ended well, while January 2018 did not. There are many positives in the outlook, including the strong consumer, an accommodative Fed, and growth in emerging markets. Newly positive in the outlook are trade breakthroughs, not only with China but also with our equally significant trading partners to the North (Canada) and south (Mexico).

Investors enjoyed an exceptional year in 2020, on several levels. First, the 29% gain was the best since 2013. Perhaps even more impressively, all 11 GICS sectors had positive performances. Leading sectors included Information Technology (+48%), Communication Services (+31%) and Financial Services (+29%). Sectors that turned in 20%+ performances included Industrial, Consumer Discretionary, Consumer Staples, Real Estate, Utilities and Materials. Lagging sectors were Healthcare (+19%) and Energy (+8%). On a three-year basis, two clear trends emerge: the IT sector has outperformed three years in a row, while the Energy sector has lagged badly three years in a row. Will the trends reverse in 2020? We think that is doubtful. Investors are increasingly eager to allocate capital to innovative IT companies that are connecting people and making corporations more efficient. Meantime, the Energy sector is facing "peak demand" forecasts at some point in the next 2-3 decades, suggesting the long-term growth outlook is severely capped. In addition to IT, other sectors we favor for "secular" long-term EPS growth include Healthcare, despite the underperformance in 2019, and Financial Services.

Investors enjoyed an exceptional year in 2020, on several levels. First, the 29% gain was the best since 2013. Perhaps even more impressively, all 11 GICS sectors had positive performances. Leading sectors included Information Technology (+48%), Communication Services (+31%) and Financial Services (+29%). Sectors that turned in 20%+ performances included Industrial, Consumer Discretionary, Consumer Staples, Real Estate, Utilities and Materials. Lagging sectors were Healthcare (+19%) and Energy (+8%). On a three-year basis, two clear trends emerge: the IT sector has outperformed three years in a row, while the Energy sector has lagged badly three years in a row. Will the trends reverse in 2020? We think that is doubtful. Investors are increasingly eager to allocate capital to innovative IT companies that are connecting people and making corporations more efficient. Meantime, the Energy sector is facing "peak demand" forecasts at some point in the next 2-3 decades, suggesting the long-term growth outlook is severely capped. In addition to IT, other sectors we favor for "secular" long-term EPS growth include Healthcare, despite the underperformance in 2019, and Financial Services.

Investors enjoyed an exceptional year in 2020, on several levels. First, the 29% gain was the best since 2013. Perhaps even more impressively, all 11 GICS sectors had positive performances. Leading sectors included Information Technology (+48%), Communication Services (+31%) and Financial Services (+29%). Sectors that turned in 20%+ performances included Industrial, Consumer Discretionary, Consumer Staples, Real Estate, Utilities and Materials. Lagging sectors were Healthcare (+19%) and Energy (+8%). On a three-year basis, two clear trends emerge: the IT sector has outperformed three years in a row, while the Energy sector has lagged badly three years in a row. Will the trends reverse in 2020? We think that is doubtful. Investors are increasingly eager to allocate capital to innovative IT companies that are connecting people and making corporations more efficient. Meantime, the Energy sector is facing "peak demand" forecasts at some point in the next 2-3 decades, suggesting the long-term growth outlook is severely capped. In addition to IT, other sectors we favor for "secular" long-term EPS growth include Healthcare, despite the underperformance in 2019, and Financial Services.

We recently raised the Financial Services sector to recommended Over-Weight from recommended Market-Weight, for the first time since 4Q18. The Fed's rate cuts have lowered the short end of the curve, eliminated yield inversion, and aided net interest margins. We also look for asset-cap relief at the big banks. The sector accounts for 13.1% of the S&P 500, down from 16.3% following the exclusion of REIT stocks. Over the past five years, the weighting has ranged from 10% to 17%. We think the sector should account for 17%-20% of diversified portfolios. Here is how we use our analysts' Financial Services sector ideas in our Focus List and Model Portfolios. All the following stocks are rated BUY.

We recently raised the Financial Services sector to recommended Over-Weight from recommended Market-Weight, for the first time since 4Q18. The Fed's rate cuts have lowered the short end of the curve, eliminated yield inversion, and aided net interest margins. We also look for asset-cap relief at the big banks. The sector accounts for 13.1% of the S&P 500, down from 16.3% following the exclusion of REIT stocks. Over the past five years, the weighting has ranged from 10% to 17%. We think the sector should account for 17%-20% of diversified portfolios. Here is how we use our analysts' Financial Services sector ideas in our Focus List and Model Portfolios. All the following stocks are rated BUY.

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 carry and Argus BUY rating.

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 Texas Instruments Inc. (TXN); Dominos Pizza Inc (DPZ); Citizens Financial Group Inc (CFG); AGNC Investment Corp (AGNC) and the Focus List deletions are Allstate Corp (The) (ALL); Advanced Micro Devices Inc. (AMD); Equinix Inc (EQIX); CarMax Inc (KMX).

Stocks were mixed on Friday, echoing an unsettled week in which blue chip indexes rose but formerly hot growth stocks cooled off. Stocks were volatile all week as investors weighed steadily rising new COVID-19 case numbers and deaths against surprisingly strong economic data including retail sales, housing starts and permits, and industrial production. On Friday, The Dow Jones Industrial Average fell 63 points, or 0.2%. The S&P 500 and the Nasdaq Composite both increased 0.3%. For the full week, the Dow increased 2.3%. The S&P 500 was up 1.3%, and the Nasdaq fell 1.1%. Year-to-date, losses are now 6.5% for the Dow and 0.2% for the S&P 500, while the Nasdaq is up 17.1%. Over the past 52 weeks, the Dow is down 1.8%, while the S&P 500 is up 8.3%, and the Nasdaq is up 28.9%.

Our rating on the Financial Services sector is Market-Weight. The recent rush into safe-haven Treasuries has led to an historical collapse in interest rates, further pressuring banks' net interest margins. We also believe that speculative-grade debt, particularly in the Energy sector, faces viability risks if economic activity remains suppressed for an extended period. The sector accounts for 10.6% of the S&P 500, down from 16.3% following the exclusion of REIT stocks. Over the past five years, the weighting has ranged from 10% to 17%. We think the sector should account for 10%-12% of diversified portfolios. The Financial sector is underperforming the market thus far in 2020. Here is how we use our analysts' Financial Services sector ideas in our Focus List and Model Portfolios. All stocks are rated BUY.

Over the past month in this space (where we examine weekly insider-sentiment data from Vickers Stock Research), we've hit on various themes that have developed during the COVID-19 stock swoon and partial recovery. Those have included 'expected behavior' from insiders; 'relative performance' in the progression of weekly insider sentiment; 'curves' that have evolved both in insider sentiment and in the progression of the virus; and 'neutral' insider sentiment as stocks came back fast from the depths of the (initial?) correction. This week, 'normalization' in sentiment is starting to set in -- even though much-improved stock prices are by no means normal yet.

Stocks are barreling ahead this January, much as they did in January 2018 and January 2019. January 2019 ended well, while January 2018 did not. There are many positives in the outlook, including the strong consumer, an accommodative Fed, and growth in emerging markets. Newly positive in the outlook are trade breakthroughs, not only with China but also with our equally significant trading partners to the North (Canada) and south (Mexico).

Investors enjoyed an exceptional year in 2020, on several levels. First, the 29% gain was the best since 2013. Perhaps even more impressively, all 11 GICS sectors had positive performances. Leading sectors included Information Technology (+48%), Communication Services (+31%) and Financial Services (+29%). Sectors that turned in 20%+ performances included Industrial, Consumer Discretionary, Consumer Staples, Real Estate, Utilities and Materials. Lagging sectors were Healthcare (+19%) and Energy (+8%). On a three-year basis, two clear trends emerge: the IT sector has outperformed three years in a row, while the Energy sector has lagged badly three years in a row. Will the trends reverse in 2020? We think that is doubtful. Investors are increasingly eager to allocate capital to innovative IT companies that are connecting people and making corporations more efficient. Meantime, the Energy sector is facing "peak demand" forecasts at some point in the next 2-3 decades, suggesting the long-term growth outlook is severely capped. In addition to IT, other sectors we favor for "secular" long-term EPS growth include Healthcare, despite the underperformance in 2019, and Financial Services.

Last week, we examined insider-trading data from Vickers Stock Research and noted an unexpected pop in bearish insider sentiment -- albeit one based on relatively small trading volume as insiders are mostly sidelined during earnings season. We said that another week of bearish results would lead us to take a deeper dive and possibly develop a more defensive posture. Well, that second week has come.

Our bond/stock model asset allocation now favors bonds over stocks (despite record-low yields) as the April-September rally in equities has lifted them to near-record price levels on very little EPS support. Our model takes into account current levels and forecasts of bond yields, inflation, stock prices, GDP and corporate earnings. Its output is expressed in terms of standard deviations to the mean, or sigma. The mean reading from the model, going back to 1960, is a modest premium for stocks of 0.06 sigma, with a standard deviation of 0.99. The current valuation level is 0.98 sigma premium for stocks -- an overvaluation, but within one standard deviation of normal. Generally, the model has done a good job of highlighting value. Stocks were very attractive compared to bonds in the late 1970s, when benchmark Treasury rates were in the high teens before heading lower over recent decades. The model indicated stocks were at a sharp premium to fair value prior to the "dot-com" crash of 2001 and at a premium prior to the Great Recession in 2007-2009. Starting in 2009, the model favored stocks -- another good call. As the chart shows, the market can manage with premiums and discounts for an extended time. Equity valuations will likely start to improve once corporate earnings begin to rebound.

Stocks struggled on Friday against the backdrop of a weak report on China's economic growth and adverse headlines on a few mega-cap stocks. The S&P 500 was down 0.4%, the Nasdaq Composite fell 0.8%, while negative news on components Boeing and Johnson & Johnson dragged the Dow Jones Industrial Average down a bit further at 1.0%. Stocks came into Friday with gains, helped by a better-than-expected start to corporate earnings and news of a tentative Brexit deal, but finished mixed. The Dow ended the full week down 0.2%, while the S&P 500 and Nasdaq managed to rise 0.5% and 0.4%, respectively. Year-to-date gains are now 14.8% for the Dow, 21.9% for the Nasdaq and 19.1% for the S&P 500.

Stocks struggled on Friday against the backdrop of a weak report on China's economic growth and adverse headlines on a few mega-cap stocks. The S&P 500 was down 0.4%, the Nasdaq Composite fell 0.8%, while negative news on components Boeing and Johnson & Johnson dragged the Dow Jones Industrial Average down a bit further at 1.0%. Stocks came into Friday with gains, helped by a better-than-expected start to corporate earnings and news of a tentative Brexit deal, but finished mixed. The Dow ended the full week down 0.2%, while the S&P 500 and Nasdaq managed to rise 0.5% and 0.4%, respectively. Year-to-date gains are now 14.8% for the Dow, 21.9% for the Nasdaq and 19.1% for the S&P 500.

Stocks rose on Friday, aided by favorable earnings announcements, particularly from Technology companies, and a better-than-expected 2Q GDP report. The Dow Jones Industrial Average climbed 0.2%, while the Nasdaq Composite added 1.1% and the S&P 500 rose 0.7%, with the latter two benchmarks hitting all-time highs. With no significant update on the trade front, second-quarter earnings again dominated the news flow last week. Generally favorable results provided a constructive backdrop for stocks, leading to rises of 0.1% for the Dow, 1.7% for the S&P 500 and 2.3% for the Nasdaq. Year-to-date gains improved to 16.6% for the Dow, 25.5% for the Nasdaq and 20.7% for the S&P 500.

Stocks rose on Friday, aided by favorable earnings announcements, particularly from Technology companies, and a better-than-expected 2Q GDP report. The Dow Jones Industrial Average climbed 0.2%, while the Nasdaq Composite added 1.1% and the S&P 500 rose 0.7%, with the latter two benchmarks hitting all-time highs. With no significant update on the trade front, second-quarter earnings again dominated the news flow last week. Generally favorable results provided a constructive backdrop for stocks, leading to rises of 0.1% for the Dow, 1.7% for the S&P 500 and 2.3% for the Nasdaq. Year-to-date gains improved to 16.6% for the Dow, 25.5% for the Nasdaq and 20.7% for the S&P 500.