Will October Be Tricky Or Treaty For Stocks?
David Kostin's recent track record leaves something to be desired: his most recent pair of thematic trade recommendations (Buy High Dividend stocks, Sell S&P; and Buy High Sharpe Ratio/Sell S&P) has not only underperformed the market, but has generated a negative absolute return. Which is not to say he has been wrong: in fact his latest recommended pairings were the most sensible he has suggested in a while. Yet the market does not care for rational choices, and either rewards high beta names in droves, or punishes them, while everything else languishes, in a zero alpha environment, coupled with low or no beta for the non risk-on sector. Yet that was September, and September is now over. What will happen in October? As Kostin suggests in the preface of his exhaustive monthly chartbook, "The fate of market rally depends on October data; 3Q earnings season: trick or treat?" With mid-term elections three days after Helloween, there may just be far too much money for the former to be even an option.
The economic data surprised to the upside in September, supporting a 9% rally in equities. However, the S&P 500 has returned 4% YTD, well behind gold (+19%) and Treasuries (+14%). Oil is up 1% YTD. Consumer Discretionary is the leading sector up 13% while Information Technology is flat YTD. Upcoming 3Q earnings season should shed light on how companies are coping with the continued US slowdown.
Kostin has prepared a screen for stocks in pretty much every industry, using more input criteria than one can shake a stick at.
So for all those (mostly institutional) types, who are hopefully trading with merely other (stupid) people's money, here is the full rundown of Kostin's picks and pans (at this point it is too painful to even attempt the traditional GS re-re-reverse psychology experiment).