Displaying items by tag: large cap

(New York)

As analysts and the market try to sort out how the new division in Congress will play out in markets, one beneficiary is becoming increasingly clear. Aerospace analyst Ron Epstein of Merrill Lynch had this to say the day before last week’s election, “The change to Democratic control of the House is the best scenario for defense spending. It points to upside in the defense budget. Gridlock keeps budgets intact, and defense is a bipartisan issue”. That argument is a bedrock of the new view that defense stocks are likely going to surge in the new Congressional environment. Epstein points out that aerospace companies are simultaneously seeing commercial and defense businesses growing strongly.

FINSUM: Earnings seem like they will stay in very good shape for the defense sector, and because budget changes look unlikely, the whole industry seems to be in for smooth sailing.

(New York)

US stocks have simply blown away the world this year. The S&P 500 is up around 9% while global shares are down 6%. The outperformance has been driven by a supportive tax policy, great economic performance, and a pro-business attitude out of the White House. However, JP Morgan says that the outperformance of US stocks relative to the globe is set to stop. US stocks and global ones will move towards parity in coming quarters as the stimuli helping American shares wanes. The parity will not come from global stocks catching up as much as the US will stagnate or fall.

FINSUM: When we take everything into account right now, we are feeling increasingly positive about the the next year. We think Democrats winning the House would be favorable for shares as it would calm money managers’ worries about some of the GOPs more extreme positions (e.g. trade war). This could bring on a “goldilocks” scenario, where the economic and political conditions are just right for stocks to move strongly higher.