Bumps in the Soft Landing

Stocks rose strongly on Friday morning after lower-than-expected employment growth raised the likelihood of an end to the Fed's rate hike campaign. The Labor Department said that the U.S. economy added 150,000 payroll jobs in October, down from a revised 297,000 in September and below the Reuters consensus forecast of 180,000. In other signs of a cooling labor market, the unemployment rate edged up to 3.9% from 3.8% a month earlier and annual growth in average hourly earnings slowed to 4.1% from 4.3%. The Dow rose 0.7%, the S&P 0.9%, and the Nasdaq 1.2%. Crude oil traded near $82 per barrel, while gold rose $8 to $2002 per ounce.

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Stocks rallied on Friday morning as investors looked past weak 3Q results and disappointing guidance from Amazon. Energy shares rose, as both Exxon and Chevron reported much stronger-than-expected earnings. On the housing front, the National Association of Realtors said that its pending home sales index fell 10.2% to 79.5 in September. The Reuters consensus forecast had called for a smaller decline of 5.0%. The Dow rose 1.6%, the S&P 1.3%, and the Nasdaq 1.4%. Crude oil fell 1% to $88 per barrel, while gold traded near $1645 per ounce.

Value stocks -- a market segment that includes high-yield stocks -- are outperforming growth stocks in 2022 for the first time since 2016. Indeed, for the past decade, the performance record has favored growth. Since 2010, the Russell 1000 Growth Index has climbed more than 600%, compared to an advance of 300% for the Russell 1000 Value Index. In nine of the past 10 years, growth stocks have topped value stocks. That wasn't always the case. In the 2000-2010 decade, which included two bear markets and the Great Recession, value stocks were better performers than growth stocks, advancing an admittedly low 8% (but still better than growth, which declined 15% during the decade). Value investors trace their roots to the famous "Security Analysis" textbook, written by Ben Graham, an economics professor at Columbia University. Warren Buffett was one of his students. Looking ahead, the roll-out of 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 year. Now, the Federal Reserve is lifting interest rates to fend off inflation, which will likely cap multiple expansion for growth companies. In any event, value is the place to achieve income. The current yield on the iShares Russell 1000 Value Index ETF is 2.1%, compared to the 0.8% current yield on the iShares Russell 1000 Growth Index ETF. For our list this week, we have screened our coverage universe for stocks that are BUY-rated at Argus Research, have an Argus Financial Strength rating of at least Medium, and have a yield of 4.0% or higher. Here's a baker's dozen that meet the criteria.

Value stocks -- a market segment that includes high-yield stocks -- are outperforming growth stocks in 2022 for the first time since 2016. Indeed, for the past decade, the performance record has favored growth. In nine of the past 10 years, growth stocks have topped value stocks. But the tide may be turning. The rollout of 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 year. Now, the Federal Reserve lifting interest rates to fend off inflation, which will likely cap multiple expansion for growth companies. Regardless, the value sector is the place to achieve income. The current yield on the iShares Russell 1000 Value Index ETF is 2.1%, compared to the 0.8% 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.

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Earnings, Economy Roll along through Market Wreckage

Value stocks -- a market segment that includes high-yield stocks -- are outperforming growth stocks in 2022. Since 2010, the Russell 1000 Growth Index has climbed more than 600%, compared to an advance of 300% for the Russell 1000 Value Index. In nine of the past 10 years, growth stocks have topped value stocks. That hasn't always been the case. In the 2000-2010 decade, including the Great Recession, value stocks were better performers than growth stocks, advancing an admittedly low 8% (but still better than growth, which declined 15%). Value investors trace their roots to the famous "Security Analysis" textbook, written by Ben Graham, an economics professor at Columbia University. Warren Buffett was one of his students. Why the recent deviation in performance? Several reasons, including changes in the make-up of the economy, growth in intangible assets, and the current low level of interest rates. The tide may be turning. The rollout of COVID-19 vaccines has given a lift to some cyclical companies (energy and regional banks) that have lagged in recent quarters, and value stocks have kept up with growth stocks in the past year. Now the Fed is poised to lift interest rates to fend off inflation, which likely will cap multiple expansion for growth companies.

Value stocks -- a market segment that includes high-yield stocks -- are outperforming growth stocks in 2022. For the past decade, the performance record has favored growth. Since 2010, the Russell 1000 Growth Index has climbed more than 600%, compared to an advance of 300% for the Russell 1000 Value Index. In nine of the past 10 years, growth stocks have topped value stocks. That hasn't always been the case. In the 2000-2010 decade, including the Great Recession, value stocks were better performers than growth stocks, advancing an admittedly low 8% -- but still better than growth, which declined 15% during the decade. Value investors trace their roots to the famous "Security Analysis" textbook, written by Ben Graham, an economics professor at Columbia University. Warren Buffett was one of his students. The rollout of COVID-19 vaccines has given a lift to some of the cyclical companies (energy firms and regional banks) that have lagged in recent quarters, and value stocks have kept up the pace with growth stocks in the past year. Now, the Federal Reserve is poised to lift interest rates to fend off high inflation, which will likely cap multiple expansion for growth companies. In any event, value is the place to achieve income. The current yield on the iShares Russell 1000 Value Index ETF is 1.6%, compared to the 0.5% current yield on the iShares Russell 1000 Growth Index ETF. For our list this week, we screened our coverage universe for stocks that are BUY-rated by Argus Research analysts, have a Financial Strength rating of at least Medium, and have a yield of 3.0% or higher. Here are 10 stocks that meet the criteria.

Value stocks -- a market segment that includes high-yield stocks -- are outperforming growth stocks in 2022. For the past decade, the performance record has favored growth, but the tide may be turning. The rollout of 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 year. Now, the Federal Reserve is poised to lift interest rates to fend off inflation, which will likely cap multiple expansion for growth companies. Regardless, the value sector is the place to achieve income. The current yield on the iShares Russell 1000 Value Index ETF is 1.6%, compared to the 0.5% 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 edged higher on Tuesday morning ahead of the Fed's policy announcement on Wednesday and the likely start of its tapering program. Investors also weighed a new round of earnings reports. Arista Networks jumped nearly 25% after the company posted strong 3Q results, announced a new stock buyback, and raised its 2022 sales guidance. The Dow rose 0.2%, the S&P 0.3%, and the Nasdaq 0.2%. Crude oil traded near $83 per barrel, while gold fell $4 to $1792 per ounce.

Pricing pressures are hot, primarily at the producer level. After months of below-target readings, mainstream measures of inflation are rising as well, compared to the deflationary lows of the pandemic. Still, we don't think the U.S. Federal Reserve will change its approach to low interest rates, and Chairman Powell has said that the central bank will let inflation rise above its 2% target in exchange for a continued decline in unemployment. We track 17 inflation measures on a monthly basis. On average, they indicate that prices are rising at an 8.0% rate, below last month's reading, as some producer-price gauges are cooling. But drilling down to core inflation, our reading is 3.0%, with the all-important five-year target rate at 2.2%. The big increases in recent months have indeed come at the producer level, as the PPI for intermediate unprocessed goods, for example, is now 50% and the PPI for intermediate processed goods is 23%. Much of this price activity is driven by the recent recovery in commodity prices, including oil (which has more-than tripled year-over year). The Fed's inflation forecasts now call for a core inflation reading of 3.4% in 2021 and 2.1% in 2022.

Stocks rose on Thursday amid a new round of earnings reports along with 2Q GDP and weekly employment data. Investors also continued to assess the Fed's probable timeline for tapering its bond-buying program. The Commerce Department said that the U.S. economy expanded at a 6.5% annualized rate in 2Q, up from the prior quarter but well below the consensus forecast of 8.4%. On the employment front, first-time jobless claims fell to 400,000 for the week ended July 24, but exceeded the consensus of 380,000. Continuing claims rose slightly to 3.27 million from 3.18 million a week earlier. The Dow rose 0.44%, the S&P 0.42%, and the Nasdaq 0.11%. Crude oil rose to $73.50 per barrel, while gold rose $29 to $1828 per ounce.

Last week in this space, we detailed stubbornly negative, but grudgingly improving, insider sentiment. The easy path this week would be to say that conditions are little changed. And in the big picture, that is true. But there are some interesting highlights in the insider-transaction data from Vickers Stock Research this week.

Stocks rose on Friday morning amid strong earnings reports from Deere and Applied Materials and new housing market data. The National Association of Realtors said that U.S. existing home sales rose 0.6% to an annualized 6.69 million units in January, above the Reuters consensus forecast of 6.61 million. The inventory of previously owned homes available for sale also fell to a record low of 1.04 million last month, down nearly 26% from the prior year. The Dow rose 0.4%, the S&P 0.4%, and the Nasdaq 0.8%. Crude oil traded near $59.50 per barrel, while gold rose $10 to $1785 per ounce.

Stocks rose on Friday morning amid strong earnings reports from Deere and Applied Materials and new housing market data. The National Association of Realtors said that U.S. existing home sales rose 0.6% to an annualized 6.69 million units in January, above the Reuters consensus forecast of 6.61 million. The inventory of previously owned homes available for sale also fell to a record low of 1.04 million last month, down nearly 26% from the prior year. The Dow rose 0.4%, the S&P 0.4%, and the Nasdaq 0.8%. Crude oil traded near $59.50 per barrel, while gold rose $10 to $1785 per ounce.

Growth stocks outperformed value, again, in 2020. But in an environment of historically low interest rates (and with the coronavirus and a high unemployment rate seemingly poised to keep them low for a long time), many investors are searching for high levels of income, often be found in value stocks. During recent years, the performance record has favored growth. Since 2010, the Russell 1000 Growth Index has climbed more than 400%, compared to an advance of 200% for the Russell 1000 Value Index. In eight of the past 10 years, growth stocks topped value. That hasn't always been the case. In the previous decade, including the Great Recession, value stocks were better performers, advancing a low 8%, but still better than growth, which declined 15%. Value investors trace their roots to the famous "Security Analysis" textbook, written by Ben Graham, an economics professor at Columbia University. The tide may now be turning. Progress on COVID-19 vaccines has given a lift to some of the cyclical companies (energy companies and banks) that have lagged in recent quarters, and value stocks have kept pace with growth stocks in the past quarter. In any event, value is the place to achieve income. 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%. For our list this week, we have screened our coverage universe for stocks that are BUY-rated by Argus Research analysts, have a Financial Strength rating of at least Medium, and have a yield of 3.0% or higher.