Year-End 2021 Review and Outlook for 2022

Stocks were down on Wednesday morning. The Labor Department said that U.S. producer prices rose 1.0% in June, following a 0.8% increase in May. The reading marked the largest annual gain in more than 10 years. The Dow fell 0.1%, the S&P was down 0.1%, and the Nasdaq fell less than 0.1%. Crude oil traded near $75 per barrel, while gold rose $3 to $1824 per ounce.

Dividends are supposed to lend stability to a portfolio. However, U.S.-based equity income investors have experienced a high degree of volatility in recent years as the endless speculation over the direction of rates has created market-timing headaches. Investors have endured wide swings in prices for rate-sensitive equity sectors such as utilities, REITs and MLPs. In our view, investing in international income stocks is one way to increase portfolio diversification while reducing sensitivity to volatile U.S interest rates. Investing in overseas stocks carries its own set of risks, including the impact of currency exchange and geopolitical turmoil. But there are also a number of positives in this segment for U.S. investors.

We recently raised our rating on the Communication Services sector to Over-Weight. In this barbell sector, media and entertainment companies should benefit from robust online activity and the reopening of theme parks and movie theaters. Providers of telecom services should benefit from ARPU gains as the 5G rollout gains traction. The style mix of the sector is approximately one-third value and two-thirds growth. The adjusted pro-forma beta is approximately 1.1 (like the old telecoms), while the yield is 0.9% (reflecting the impact of Google and Facebook). The smoothed growth rate is 7% and the P/E ratio is 21x. The sector accounts for 11% of the S&P 500. We think investors should consider allocating 12%-14% of diversified portfolios to the sector. Here are some of our top picks.

Stocks rallied through the final nine months of 2020 despite the raging pandemic, a summer of unprecedented wildfires, and an increasingly partisan political climate. Stocks have done so, at least partly, because the worst economic effects of the pandemic have hit those living toward the lower end of the economic scale, while leaving others largely unscathed.

Our rating on the Communication Services sector is Over-Weight. While existing pressures on the sector continue, including assaults by regulators on social media companies and intense competition among telecom companies, these concerns have been superseded by COVID-19. In this "barbell" sector, telco giants Verizon and AT&T are now apparent islands of relative stability and secure income. Simultaneously, internet giants Alphabet and Facebook are acting as forums for community concerns about the coronavirus. The style mix of the sector is approximately one-third "value" and two-thirds "growth." The adjusted pro-forma beta is approximately 1.0 (like the old Telecoms), while the yield is 0.9% (reflecting the impact of Google and Facebook). The smoothed growth rate is 7% and the P/E ratio is 21-times. The sector accounts for 11% of the S&P 500. We think investors should consider allocating 12%- 14% of their diversified Portfolios to the sector. Here are some of our top picks.

Dividends are supposed to lend stability to a portfolio. However, U.S.-based equity income investors have experienced a high degree of volatility in recent years. In our view, investing in international income stocks is one way to increase portfolio diversification while reducing sensitivity to volatile U.S interest rates. Investing in overseas stocks carries its own set of risks, including the impact of currency exchange and geopolitical turmoil. But there are also a number of positives in this segment for U.S. investors. One is a more robust selection of high-quality names. Yields also tend to be higher in overseas markets in general. And finally, valuations can be more attractive.

Stocks rose on Thursday morning following a better-than-expected June employment report. The Labor Department said that the U.S. economy added 4.8 million payroll jobs in June, up from 2.7 million in May and above the Reuters consensus forecast of 3 million. The rebound over the last two months follows a pandemic-driven plunge of 20.8 million in April. The official unemployment rate also fell to 11.1% from 13.3% in May, and was better than the consensus estimate of 12.4%. The Dow rose 0.8%, the S&P 0.8%, and the Nasdaq 0.9%. Crude oil rose to $40 per barrel, while gold traded near $1790 per ounce.

We recently raised our rating on the Communication Services sector to Over-Weight from Market-Weight. While existing pressures remain, including assault by regulators on social media companies and intense competition among telecom companies, these concerns have been superseded by COVID-19. In this "barbell" sector, telco giants Verizon and AT&T are now apparent islands of relative stability and secure income. Simultaneously, internet giants Alphabet & Facebook are acting as forums for community concerns around the coronavirus outbreak. Given the lack of historical performance data for the new sector, S&P Dow Jones Indices performed pro-forma back-testing over a 10-year period to determine the general characteristics of the new sector. The style mix is approximately one-third "value" and two-thirds "growth," while the predecessor Telecom sector was 100% value. The adjusted pro-forma beta is approximately 0.8 (like the old Telecoms), while the yield is 0.9% (reflecting the impact of Google and Facebook). The smoothed growth rate is 8% and the P/E ratio is 19.6x. The sector accounts for 10.6% of the S&P 500. We think investors should consider allocating 12%-14% of their diversified Portfolios to the sector.

Considering the volatility all around us -- everywhere, and not just in the stock market -- the course of events when it comes to insider sentiment is downright orderly.

Considering the volatility all around us -- everywhere, and not just in the stock market -- the course of events when it comes to insider sentiment is downright orderly.

With about 275 million wireless customers, Vodafone is one of the largest wireless carriers in the world. More recently, the firm has acquired cable operations and gained access to additional fixed-line networks, either building its own or gaining wholesale access. Vodafone is increasingly pushing converged services of wireless and fixed-line telephone services. Europe accounts for about three fourths of reported service revenue, with major operations in Germany (about 26% of total service revenue), the U.K. (15%), Italy (13%), and Spain (11%). Outside of Europe, 65%-owned Vodacom, which serves sub-Saharan Africa, is Vodafone’s largest controlled subsidiary (12% of total service revenue). The firm also owns stakes in operations in India, Australia, and the Netherlands.

Dividends are supposed to lend stability to a portfolio. However, U.S.-based equity income investors have experienced a high degree of volatility in recent years. In 2018, the Federal Reserve embarked on an aggressive campaign to raise interest rates -- causing Treasury yields to swoop and dive, resulting in a wild ride for supposedly stable U.S. high-income equities. In 2019, the Fed lowered rates, in order to restore a normal upward slope in the yield curve. And in 2020, global investors, fearing the spread of the coronavirus, have pushed rates lower still. The endless speculation over the direction of rates has created market-timing headaches for equity income investors. They have endured wide swings in prices for rate-sensitive equity classes such as utilities, REITs and MLPs -- even as generally positive industry fundamentals remained largely intact. In our view, investing in international income stocks is one way to increase portfolio diversification while reducing sensitivity to U.S interest rates. Investing in overseas stocks carries its own set of risks, including the impact of currency exchange and geopolitical turmoil. But there are also many positives in this asset class for U.S. investors.

Dividends are supposed to lend stability to a portfolio. However, U.S.-based equity income investors have experienced a high degree of volatility in recent years. In 2018, the Federal Reserve embarked on an aggressive campaign to raise interest rates -- causing Treasury yields to swoop and dive, resulting in a wild ride for supposedly stable U.S. high-income equities. In 2019, the Fed lowered rates, in order to restore a normal upward slope in the yield curve. And in 2020, global investors, fearing the spread of the coronavirus, have pushed rates lower still. The endless speculation over the direction of rates has created market-timing headaches for equity income investors. They have endured wide swings in prices for rate-sensitive equity classes such as utilities, REITs and MLPs -- even as generally positive industry fundamentals remained largely intact. In our view, investing in international income stocks is one way to increase portfolio diversification while reducing sensitivity to U.S interest rates. Investing in overseas stocks carries its own set of risks, including the impact of currency exchange and geopolitical turmoil. But there are also many positives in this asset class for U.S. investors.

Stocks continued their rally on Tuesday morning. The U.S. Census Bureau announced that building permits rose 1.4% sequentially to a seasonally adjusted annual rate of 1,482,000. Housing Starts in November rose 3.2% to a seasonally adjusted annual rate of 1,365,000. The Dow rose 0.3%, the S&P 0.1%, and the Nasdaq 0.1%. Crude oil rose above $60 per barrel, while gold traded near $1480 per ounce.

Stocks continued their rally on Tuesday morning. The U.S. Census Bureau announced that building permits rose 1.4% sequentially to a seasonally adjusted annual rate of 1,482,000. Housing Starts in November rose 3.2% to a seasonally adjusted annual rate of 1,365,000. The Dow rose 0.3%, the S&P 0.1%, and the Nasdaq 0.1%. Crude oil rose above $60 per barrel, while gold traded near $1480 per ounce.

Considering the volatility all around us -- everywhere, and not just in the stock market -- the course of events when it comes to insider sentiment is downright orderly.

Dividends are supposed to lend stability to a portfolio. However, U.S.-based equity income investors have experienced a high degree of volatility in recent years. In 2018, the Federal Reserve embarked on an aggressive campaign to raise interest rates -- causing Treasury yields to swoop and dive, resulting in a wild ride for supposedly stable U.S. high-income equities. In 2019, the Fed lowered rates, in order to restore a normal upward slope in the yield curve. And in 2020, global investors, fearing the spread of the coronavirus, have pushed rates lower still. The endless speculation over the direction of rates has created market-timing headaches for equity income investors. They have endured wide swings in prices for rate-sensitive equity classes such as utilities, REITs and MLPs -- even as generally positive industry fundamentals remained largely intact. In our view, investing in international income stocks is one way to increase portfolio diversification while reducing sensitivity to U.S interest rates. Investing in overseas stocks carries its own set of risks, including the impact of currency exchange and geopolitical turmoil. But there are also many positives in this asset class for U.S. investors.

Dividends are supposed to lend stability to a portfolio. However, U.S.-based equity income investors have experienced a high degree of volatility in recent years. In our view, investing in international income stocks is one way to increase portfolio diversification while reducing sensitivity to volatile U.S interest rates. Investing in overseas stocks carries its own set of risks, including the impact of currency exchange and geopolitical turmoil. But there are also a number of positives in this segment for U.S. investors. One is a more robust selection of high-quality names. Yields also tend to be higher in overseas markets in general. And finally, valuations can be more attractive.

With earnings season now in full swing, the volume of meaningful insider-sentiment data is predictably (very) low. But as we've said in the past, a lack of data still can offer 'signals.' Further data that does rise to the top when there generally is very little data can be of particular interest.

With earnings season now in full swing, the volume of meaningful insider-sentiment data is predictably (very) low. But as we've said in the past, a lack of data still can offer 'signals.' Further data that does rise to the top when there generally is very little data can be of particular interest.

We recently raised our rating on the Communication Services sector to Over-Weight from recommended Market-Weight. Investors are becoming more comfortable with the barbell shape of the new sector, featuring slow-growth, high-yield telecoms on one end and fast-growth, no-yield internet companies on the other. On one end of the barbell, domestic telcos sell services rather than goods and have limited overseas exposure. And telcos should begin to benefit from 5G traffic across their networks in the coming year. At the other end, we see improved prospects for internet companies - also selling services, not goods - as they move beyond privacy and data misuse issues. Given the lack of historical performance data for the new sector, S&P Dow Jones Indices performed pro-forma back-testing over a 10-year period to determine the general characteristics of the new sector. The style mix is approximately one-third "value" and two-thirds "growth," while the predecessor Telecom sector was 100% value. The adjusted pro-forma beta is approximately 1.1, compared to 0.7 for Telecom Services. The yield is 0.7%, the smoothed growth rate is 9% and the P/E ratio is 18.4x. The sector accounts for 10.5% of the S&P 500. We think investors should consider allocating 12%-14% of their diversified portfolios to the sector.

Dividends are supposed to lend stability to a portfolio. However, U.S.-based equity income investors have experienced a high degree of volatility in recent years. The Federal Reserve in 2018 embarked on an aggressive campaign to raise interest rates, causing Treasury yields to swoop and dive, resulting in a wild ride for supposedly stable U.S. high-income equities. The endless speculation over the timing of the Fed's rate hikes created market-timing headaches for equity income investors. They endured wide swings in prices for rate-sensitive equity classes such as utilities, REITs and MLPs - even as generally positive industry fundamentals remained largely intact. In our view, investing in international income stocks is one way to increase portfolio diversification while reducing sensitivity to the Fed's head fakes on rate policy. Investing in overseas stocks carries its own set of risks, including the impact of currency exchange and geopolitical turmoil. But there are also lots of positives in this asset class for U.S. investors.

Dividends are supposed to lend stability to a portfolio. However, U.S.-based equity income investors have experienced a high degree of volatility in recent years. The Federal Reserve in 2018 embarked on an aggressive campaign to raise interest rates, causing Treasury yields to swoop and dive, resulting in a wild ride for supposedly stable U.S. high-income equities. The endless speculation over the timing of the Fed's rate hikes created market-timing headaches for equity income investors. They endured wide swings in prices for rate-sensitive equity classes such as utilities, REITs and MLPs - even as generally positive industry fundamentals remained largely intact. In our view, investing in international income stocks is one way to increase portfolio diversification while reducing sensitivity to the Fed's head fakes on rate policy. Investing in overseas stocks carries its own set of risks, including the impact of currency exchange and geopolitical turmoil. But there are also lots of positives in this asset class for U.S. investors.

Stocks wrapped a positive week on June 7 with a 'bad news is good news' rally. The bad news was a puny 75K gain in May nonfarm payrolls, and jobs shaved off April and March. The corollary goods news was a (perceived) increased likelihood that the Fed will reverse course and cut rates, perhaps as soon as this summer.

Stocks wrapped a positive week on June 7 with a 'bad news is good news' rally. The bad news was a puny 75K gain in May nonfarm payrolls, and jobs shaved off April and March. The corollary goods news was a (perceived) increased likelihood that the Fed will reverse course and cut rates, perhaps as soon as this summer.

As investors 'celebrated' the 10-year anniversary of the bull market that began in March 2009, the S&P 500 was celebrating the one-year anniversary of trading in the 2,700s. While 2018 (in stock-market terms) is remembered for its fourth-quarter flop, the index spent almost the entire year below its January 2018 closing high of 2,873. The S&P 500 did not reclaim that high until late August '18, and then gave it all back beginning late in September '18.

As investors 'celebrated' the 10-year anniversary of the bull market that began in March 2009, the S&P 500 was celebrating the one-year anniversary of trading in the 2,700s. While 2018 (in stock-market terms) is remembered for its fourth-quarter flop, the index spent almost the entire year below its January 2018 closing high of 2,873. The S&P 500 did not reclaim that high until late August '18, and then gave it all back beginning late in September '18.

Dividends are supposed to lend stability to a portfolio. However, U.S.-based equity income investors have experienced a high degree of volatility in recent years. The Federal Reserve in 2018 embarked on an aggressive campaign to raise interest rates, causing Treasury yields to swoop and dive, resulting in a wild ride for supposedly stable U.S. high-income equities. The endless speculation over the timing of the Fed's rate hikes created market-timing headaches for equity income investors. They endured wide swings in prices for rate-sensitive equity classes such as utilities, REITs and MLPs - even as generally positive industry fundamentals remained largely intact. In our view, investing in international income stocks is one way to increase portfolio diversification while reducing sensitivity to the Fed's head fakes on rate policy. Investing in overseas stocks carries its own set of risks, including the impact of currency exchange and geopolitical turmoil. But there are also lots of positives in this asset class for U.S. investors.

Stocks wrapped a positive week on June 7 with a 'bad news is good news' rally. The bad news was a puny 75K gain in May nonfarm payrolls, and jobs shaved off April and March. The corollary goods news was a (perceived) increased likelihood that the Fed will reverse course and cut rates, perhaps as soon as this summer.

Sound Economy at Odds with Gloomy Stock Mood

Sound Economy at Odds with Gloomy Stock Mood

Stocks continued their rally on Tuesday morning. The U.S. Census Bureau announced that building permits rose 1.4% sequentially to a seasonally adjusted annual rate of 1,482,000. Housing Starts in November rose 3.2% to a seasonally adjusted annual rate of 1,365,000. The Dow rose 0.3%, the S&P 0.1%, and the Nasdaq 0.1%. Crude oil rose above $60 per barrel, while gold traded near $1480 per ounce.

With earnings season now in full swing, the volume of meaningful insider-sentiment data is predictably (very) low. But as we've said in the past, a lack of data still can offer 'signals.' Further data that does rise to the top when there generally is very little data can be of particular interest.

Sound Economy at Odds with Gloomy Stock Mood