MARKET OUTLOOK, 18 MAY 2020

This week the stock market returned to positive territory with big technology companies leading the heard.
Stocks decline last week after Fed J.Powell earns about recovery, US-China tensions increase

The stock was down this week with the S&P 500 down -2.3% to 2863.7.

This week continued the previous few weeks high volatility environment that is probably here to stay for the next few weeks as the market is in a crucial decision point.

On one hand, there are the bulls pulling up with FOMO, positive hope for a vaccine against the Coronavirus, optimism about the short duration of the current recession and economy reopening soon, on the other hand, there are the bears pulling down with economic conditions fear, uncertainty as to how and when will the economy recover and what is the damage to small-medium size businesses, for us 2850 for the S&P500 is that decision point, moving above it means the bulls have won and below means, the bears are in control.

AlphaOverBeta Next Week Forecast

We have chartered a number of bands for the S&P500, these bands are used for risk control and decision making.

  • 285-290 – this is the bullish zone, as long as the S&P500 stays in or above this zone, the sentiment is bullish.
  • 280-265 – This is the “Undecided” zone where the market had not decided yet as to where the stock market is going.
  • Below 265 – is the bearish zone with the bears in control pulling prices downwards.

Will the consumer spend again?

Consumer spending contributes almost 70% of the total United States production. In 2019, that was $13.28 trillion.

In order to show growth, the consumer needs to start spending again, these are the categories of U.S. consumer spending, ranked from largest to smallest:

housing, transportation, food & beverages, and medical care.

For the US economy to show positive improvement the consumer has to:

  1. Buy a new house – unlikely any time soon, this is by far the largest expenditure of any US household and will probably be put on hold in the next quarters.
  2. Buy a new car, commute more often – unlikely to happens soon, unless car manufacturers find a way to reduce prices significantly
  3. Buy more food & beverages – there will always be a steady demand for that so no big change up or down in the future.
  4. Medical Care – now here is a category which I believe will see an increase, the coronavirus health shock will make the consumer take a second look at health issues and decide to increase spending on personal health.

So in total, there will be a significant drop in GDP in 2020, or, in the better case, the GDP will stay put.

AlphaOverBeta uptrending watchlist

Using AOB Dashboard to spot trending opportunities in the market.

Investment Hidden Gem

Out top-ranking stock for the week is Delphi Technologies PLC (DLPH)

Delphi Technologies PLC engages in the design, development, and manufacture of integrated powertrain technologies worldwide. The company operates through four segments: Fuel Injection Systems, Powertrain Products, Electrification & Electronics, and Aftermarket.

Analysts Recommendations

DateFirmTo GradeFrom GradeAction
16/03/2020Morgan StanleyEqual-Weightmain
30/03/2020Morgan StanleyEqual-Weightmain
24/04/2020BairdNeutralOutperformdown
07/05/2020BarclaysEqual-Weightmain

Specific stocks in these sectors may be found on our Dashboard

AlphaOverBeta sectors ranking

Below you may find our leading and lagging sectors.

As a norm for the past few weeks the Bio and Healthcare sectors are moving forward and are bullish sectors, this makes sense in the current environment, as they race to find a cure for the Coronavirus, the first one to get to the finish line will have most of the gains in this race.

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We have a number of specific stock picks from the above sectors in our website,
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