Value stocks -- a market segment that includes high-yield stocks -- outperformed growth stocks in 2022. That's a recent rarity, as for the past decade-plus, the performance record has favored growth. But the tide turned in 2022. The rollout of COVID-19 vaccines gave a lift to some of the cyclical companies (energy and regional banks) that had lagged in recent quarters, and value stocks outpaced growth stocks that year. While growth stocks have retaken the lead since 2023, the Federal Reserve continues to keep interest rates high to fend off inflation. This could possibly cap multiple expansion for growth companies in coming quarters. In any event, the value sector is the place to achieve income.

Stocks bounced back on Wednesday from yesterday's inflation fueled sell-off. Chicago Fed President Goolsbee noted that 'Even if inflation comes in a bit higher for a few months...it would still be consistent with our path back to target.' The Dow was up 0.1%, the S&P rose 0.4%, and the Nasdaq gained 0.7%. Crude oil fell slightly to $77.50 per barrel, while gold fell $2 to $2005 per ounce.

Stocks were mixed on Friday after briefly rising following new inflation data. The PPI fell 0.1% in December, following a 0.1% decrease in November and 0.4% decrease in October. However, oil prices jumped today after the U.S. and British forces struck several Houthi targets in a move aimed at diminishing the group's capabilities in the area. On the earnings front, airline stocks are down, after Delta lowered its 2024 guidance. Bank stocks also have begun reporting. The Dow fell 0.5%, while the S&P 500 was nearly flat, and the Nasdaq was up 0.1%. Crude oil traded near $74 per barrel, while gold rose $37 to $2056 per ounce.

Stocks were mixed on Friday after briefly rising following new inflation data. The PPI fell 0.1% in December, following a 0.1% decrease in November and 0.4% decrease in October. However, oil prices jumped today after the U.S. and British forces struck several Houthi targets in a move aimed at diminishing the group's capabilities in the area. On the earnings front, airline stocks are down, after Delta lowered its 2024 guidance. Bank stocks also have begun reporting. The Dow fell 0.5%, while the S&P 500 was nearly flat, and the Nasdaq was up 0.1%. Crude oil traded near $74 per barrel, while gold rose $37 to $2056 per ounce.

Equities have sent confusing and contradictory signals throughout a back-and-forth 2023. Since setting year-highs at the end of July, the S&P 500 has mainly moved lower. During various attempted recovery spurts, the one thing that has been consistently lacking has been breadth. A handful of AI superhero stocks cannot carry the market, and narrow recovery tries are doomed to fail, in our view.

Inflation, a possible recession, higher interest rates, and higher gas prices. Consumers don't want to hear it. They want to go out and eat. They were denied that experience during the pandemic and are making up for lost time with "revenge eating" and "revenge travel." In the September retail sales report that caused a fuss last week, the category of "Food Services and Drinking Places" was ranked number one for growth, up nearly 12% in the first nine months of 2023 (compared to the same period a year ago). No other category was even close. For sure, the restaurant sector has some headwinds. One is chicken prices. The price of chicken is at an all-time high, at $1.96 per pound, up 33% in August 2023 from two years ago. Of course, chicken is one of the most-popular menu items across the range of restaurants -- from fast food to casual dining to formal dining. Restaurants, as best they can, try to pass on higher prices to patrons. But at some point, patrons won't bite (pun intended.) Next to consider are obesity drugs. Some analysts worry that these now-popular drugs will curb appetites and stop consumers from snacking. Argus' restaurant analyst John Staszak, CFA, is keeping an eye on the impact of these obesity drugs. But based on their high prices and possible safety issues, John sees only a slightly negative impact for now. Argus has an Over-Weight rating on the Consumer Discretionary sector. Here are some Argus BUY-rated restaurant stocks that might well show EPS growth over the next year.

Value stocks -- a market segment that includes high-yield stocks -- outperformed growth stocks in 2022 for the first time since 2016. Indeed, for the past decade, the performance record has favored growth. But the tide turned in 2022. The rollout of COVID-19 vaccines gave a lift to some of the cyclical companies (energy companies and regional banks) that had lagged in recent quarters, and value stocks outpaced growth stocks over the past year. Meanwhile, the Federal Reserve continues to lift interest rates to fend off inflation, which could possibly cap multiple expansion for growth companies for a few more quarters. Regardless, the value sector is the place to achieve income. The current yield on the iShares Russell 1000 Value Index ETF is 2.2%, compared to the 0.9% current yield on the iShares Russell 1000 Growth Index ETF. For our High-Yield Theme Model Portfolio, we are seeking stocks with yields of at least 3.0%. This moves us deep into the value segment of the market.

Value stocks -- a market segment that includes high-yield stocks -- outperformed growth stocks in 2022 for the first time since 2016. Indeed, for the past decade, the performance record has favored growth. But the tide turned in 2022. The rollout of COVID-19 vaccines gave a lift to some of the cyclical companies (energy companies and regional banks) that had lagged in recent quarters, and value stocks outpaced growth stocks over the past year. Meanwhile, the Federal Reserve continues to lift interest rates to fend off inflation, which could possibly cap multiple expansion for growth companies for a few more quarters. Regardless, the value sector is the place to achieve income. The current yield on the iShares Russell 1000 Value Index ETF is 2.2%, compared to the 0.9% current yield on the iShares Russell 1000 Growth Index ETF. For our High-Yield Theme Model Portfolio, we are seeking stocks with yields of at least 3.0%. This moves us deep into the value segment of the market.

Stocks fell on Wednesday morning amid continued concerns about rating downgrades for some U.S. banks and more weak economic data from China, which reported deflation in both consumer and producer prices in July. On the earnings front, Twilio shares rose after the software maker posted above-consensus 2Q results and raised its full-year earnings forecast. Meanwhile, Lyft shares fell 7% on concerns about slowing revenue growth as the company cuts prices to better compete with Uber. The Dow fell 0.4%, the S&P 0.6%, and the Nasdaq 1.2%. Crude oil rose slightly to $83.50 per barrel, while gold fell $10 to $1950 per ounce.

In our previous commentary on insider sentiment, we noted five weeks of bullish sentiment based on data from Vickers Stock Research. We also noted a slowing in the bullish mood; not a move to neutral or bearish, but a slowing in the growth of bullish sentiment. Among the data, insider sentiment from companies that list on the Nasdaq remained atop the leader board.

In the typically strong month of April, the stock market laid an egg -- with most of the major indices posting minimal returns, and the small- and mid-cap stocks losing minor ground. The S&P 500 rose 1.5%, the Nasdaq was flat, and the Nasdaq 100 gained 0.5%. The Dow Jones Industrial Average was the big winner, up 2.5%. The S&P MidCap 400 fell 0.80% and the Russell 2000 dropped 1.8%, thanks to heavy exposure to small- and mid-sized banks.

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 Cracker Barrel Old Country Sto (CBRL); DraftKings Inc. (DKNG); Intel Corp. (INTC); J.M. Smucker Co. (SJM) and the Focus List deletions are Restaurant Brands Intl In (QSR); Monster Beverage Corp. (MNST); Expedia Group Inc (EXPE); Fox Corporation (FOXA).

Small- and mid-cap stocks (SMID) have underperformed large-caps over the past 12 months, but may be in a better position to generate market-beating returns going forward. SMID companies tend to focus on domestic markets, so their businesses could be less disrupted by the fallout from the Russian invasion of Ukraine, high European inflation or other geopolitical developments. As well, the prices of SMID stocks generally are lower than the prices of large-caps. SMID stocks can be risky, but diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. We estimate that 12%-15% of the U.S. stock market's capitalization is comprised of SMID stocks. For our purposes, we use a threshold of $15 billion to define a SMID stock.

Value stocks -- a market segment that includes high-yield stocks -- outperformed growth stocks in 2022 for the first time since 2016. Indeed, for the past decade, the performance record has favored growth. But the tide turned in 2022. The rollout of COVID-19 vaccines gave a lift to some of the cyclical companies (energy companies and regional banks) that had lagged in recent quarters, and value stocks outpaced growth stocks over the past year. Meanwhile, the Federal Reserve continues to lift interest rates to fend off inflation, which could possibly cap multiple expansion for growth companies for a few more quarters. Regardless, the value sector is the place to achieve income. The current yield on the iShares Russell 1000 Value Index ETF is 2.2%, compared to the 0.9% current yield on the iShares Russell 1000 Growth Index ETF. For our High-Yield Theme Model Portfolio, we are seeking stocks with yields of at least 3.0%. This moves us deep into the value segment of the market.

Stocks fell in volatile trading on Tuesday morning following new inflation data. The Labor Department reported that its consumer price index rose 6.4% from the prior year in January, down slightly from a 6.5% increase in December. Excluding food and energy prices, the core CPI rose at a 5.6% annual rate last month, down from 5.7% in December but above the consensus forecast of 5.5% growth. The Dow fell 1.2%, the S&P 0.9%, and the Nasdaq 0.8%. Crude oil fell more than 1% to $79 per barrel, while gold traded near $1862 per ounce.

Early last week, we noted that insider-sentiment data from Vickers Stock Research suggested that corporate insiders 'may coast into the end of 2022 on autopilot, without an expectation for share prices to surge but also without fear that a significant pullback is pending.' By the end of last week, that statement was tested (severely) as stocks surged early in the week and then pulled back significantly at the end of the week. So, has sentiment among insiders now changed? Simply put, it has not.

Stocks fell on Thursday morning following hawkish comments from Fed officials, a sharp decline in housing starts, and mixed earnings reports. Macy's posted better-than-expected 3Q earnings and raised its full-year outlook, while Kohl's withdrew its guidance after a sharp drop in earnings. On the housing front, the Commerce Department said that U.S. housing starts fell 4.2% in October to a seasonally adjusted 1.425 million, still above the Reuters consensus of 1.410 million. The Dow fell 0.8%, the S&P 1.2%, and the Nasdaq 1.1%. Crude oil fell more than 3% to $82.50 per barrel, while gold fell $15 to $1761 per ounce.

Stocks fell on Thursday morning, extending yesterday's Fed-driven selloff. On Wednesday, Fed Chair Jerome Powell said that the central bank still had 'some ways to go' on rate hikes, and that interest rates at the end of the cycle could be higher than previously expected. The comments dashed investor hopes for a quick pivot to diminishing rate hikes. On the earnings front, Qualcomm shares fell sharply after the chipmaker issued much weaker than expected fiscal 1Q23 guidance, citing slower demand for smartphones. The Dow fell 0.5%, the S&P 0.6%, and the Nasdaq 0.5%. Crude oil fell 2% to $88 per barrel, while gold fell $24 to $1626 per ounce.

Small- and mid-cap stocks (SMID stocks) 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 less disrupted by the fallout from the Russian invasion of Ukraine. As well, the prices of SMID stocks generally are lower than the prices of large-caps. SMID stocks can be risky -- and large-caps outperformed SMID stocks in 11 of the 19 years in our test period. Still, despite the risks, diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. We estimate that 12%-15% of the U.S. stock market's capitalization is comprised of SMID stocks. For our purposes, we use a threshold of $20 billion to define a SMID stock.

These are tough days for the stock market, with most of the damage coming from the mini crash on September 13. For that trading week, the S&P 500 fell 4.8%, the Nasdaq lost 5.5%, and the Nasdaq 100 (QQQ) declined 5.8%. All 11 of the S&P 500 sectors fell, as there was no place to hide. Basic Materials, Industrials, Communication Services, Real Estate, and Technology all dropped more than 6%.

Bonds have not provided a safe haven in 2022, with the benchmark Core U.S. Aggregate Bond Index down almost 11% year to date. We think the worst of the damage at the long end of the curve for this cycle has been done. Our forecast for the 10-year Treasury Note calls for an increase of approximately 50-75 basis points through 2023, compared to the 160-basis-point jump in the first six months of this year. At the short end of the curve, we look for an aggressive mover higher into 2023. It is our view that the Fed will hike the federal funds rate 75 basis points at its next meeting, and we think the Fed pushes through two more increases -- in November (50 bps) and December (25 bps). At that point, the federal funds rate could be 3.50%-3.750%, which is above the Fed's estimate for 2.7% inflation by year-end 2022. What will these hikes do to the economy? The economy is in a solid growth mode and can handle higher rates for at least another quarter or two, but it may not be long before the housing market stumbles and unemployment starts to rise toward 5.0%. What will the hikes do to the yield curve? The yield curve is inverted, as investors expect the Fed to go too far and push the economy into recession. If the central bank can avoid a downturn (no easy task now that GDP has fallen for two quarters in a row), the yield curve should again slope upward, which is our forecast for next year. What will modestly higher long-term rates do to the stock market? They will limit most appreciation possibilities from multiple expansion. Earnings will drive returns going forward.

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 AstraZeneca PLC (AZN); Restaurant Brands Intl In (QSR); Hormel Foods Corp. (HRL); Huntington Bancshares, Inc. (HBAN) and the Focus List deletions are Apollo Global Management Inc (APO); Vertex Pharmaceuticals, Inc. (VRTX); Procter & Gamble Co. (PG); Marriott International, Inc. (MAR).

With Canada's inflation rate running at 8.1%, the country's central bank, the Bank of Canada, raised interest rates by a full 100 basis points in July, making for an even-steeper trajectory than the U.S. Federal Reserve's recent 75-basis-point hike. High levels of household debt and potential over-lending in the country's real estate segment bear watching, but higher interest rates will go a long way to help lending margins in the Financial sector (the country's largest by market cap at nearly one-third of the Toronto Stock Exchange). Meanwhile, the once-hot Energy sector, the second largest by market cap at 13%, has cooled along with oil prices. Lower energy prices and the flattening of U.S. consumer price inflation have brought on talk that we may have hit peak inflation, implying that central banks may not need to be as aggressive with interest-rate hikes -- thereby lowering the chances of a recession. We believe that select companies in Canada, including in the consumer segment, offer compelling investment opportunities.

In late May, we noted that the proprietary sell/buy ratios from Vickers Stock Research were becoming increasingly bullish after a very difficult start for stocks in 2022. We made comparisons to past such events, concluding that history suggested stock prices might well rise significantly over the next three months. Major indices moved still lower over the next few weeks, while Vickers' sell/buy ratios became increasingly bullish. Stocks seemingly bottomed (we hope) in mid-June.

April Deluge: Our Monthly Survey of the Economy, Interest Rates, and Markets

With the market focus shifting from inflation to the Russian invasion of Ukraine, stocks finished last week with a surprise two-day rally that included the best stock day of 2022. On Friday, the Dow Jones Industrial Average soared by 835 points, or 2.51%. The S&P 500 rose 2.24%, and the Nasdaq Composite gained 1.64%. For the week, the DJIA was down 20 points, or 0.1%, while the S&P 500 rose 0.82%, and the Nasdaq Composite gained 1.09%. For the year to date, the Dow is down 6.2%; the S&P 500 is off 8.01%; and the Nasdaq Composite remains in correction territory though off its lows, down 12.47%.

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.

What happened to the September sell-off? A month ago, the S&P 500 was in the process of falling off all-time highs (ATHs) set early in September. From the ATH of 4,537 on 9/2/21, the '500' fell to the 4,350s on 9/21/21; staged what would be a failed rally to just under 4,450 on 9/24/21; and then made twin lows right around 4,300 on 9/30/21 and 10/4/21.

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 DuPont de Nemours Inc (DD); Hilton Worldwide Holdings Inc (HLT); Twilio Inc (TWLO); Corning, Inc. (GLW) and the Focus List deletions are LyondellBasell Industries NV (LYB); American Electric Power Co Inc (AEP); International Business Machine (IBM); T-Mobile US Inc (TMUS); Restaurant Brands Intl In (QSR).

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 mixed on Tuesday morning amid uncertainty about the economic impact of the Delta variant. Factory order data showed slower growth but still topped the consensus forecast. The Commerce Department said that U.S. factory orders rose 1.5% in June, above the Reuters consensus of 1.0% but down from 2.3% growth in May. The Dow rose 0.2%, the S&P fell 0.1%, and the Nasdaq fell 0.6%. Crude oil traded near $70 per barrel, while gold fell $8 to $1814 per ounce.

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.

Vickers Stock Research, a subsidiary of Argus Research Group, tracks and analyzes insider trading and institutional ownership trends. Form 13Fs are due 45 days after the end of calendar quarters, and are just now coming in from 1Q21. We like to review the 13Fs of the major activist investors, including Carl Icahn, Trian Fund Management, Jana Partners, and ValueAct Holdings, among others. Activist investing has evolved in recent years and is now less about generating a short-term return on an underpriced stock and more about achieving long-term returns through an active management/investor partnership. Here are some recent new purchases and key holdings of activist investors, according to Vickers.

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 Director of Research Kelleher typically adds three or four new stocks per month. Below are the latest additions, all of which are rated BUY at Argus.

Stock prices, as expressed by the S&P 500, are near all-time highs and, on depressed earnings, are well above fair value (which our model pegs at closer to 3500 due to the weak pandemic-influenced EPS in 2020). Our stock-market valuation model takes into account factors such as stock prices, five-year normalized earnings (three historical years, two forward-looking), GDP, inflation, and T-bond and T-bill yields. We note that stocks rarely trade right at fair value. Since 1960, on average, the index has traded at a tight 2% above fair value, but the standard deviation to the mean is 16%. That means that we normally expect the S&P 500 to trade between 14% undervalued and 18% overvalued. At current prices, the stock market is almost 30% above fair value, implying that investors are quite optimistic about equities. Though we are still bullish on the economy, earnings, and market recoveries, we'd feel better about the longer-term outlook for stocks if valuations were not so stretched. Several factors could improve valuations: a pullback in stock prices; lower bond yields; or better earnings (which we expect to see in upcoming quarters).

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 Monster Beverage Corp. (MNST); Restaurant Brands Intl In (QSR); General Dynamics Corp. (GD); HCA Healthcare Inc (HCA) and the Focus List deletions are Peloton Interactive Inc (PTON); Clorox Co. (CLX); Lockheed Martin Corp. (LMT); Regeneron Phars, Inc (REGN).

Continuing the Process: Our Monthly Survey of the Economy, Interest Rates, and Markets