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This week, Zacks Chief Equity Strategist and Economist John Blank, PhD discusses:

• The Zacks approach to asset allocation in 2024. John writes the Zacks Monthly Investing Update and Asset Allocation report, and this is the first of two webinars he will present offering his expert insights on this critical topic. John begins this session by defining the broad asset classes (equities, bonds, commodities, etc.), outlining the 7 characteristics of an asset class, and enumerating the three asset allocation strategies.

• John then digs into charts showing annualized returns for some key asset class indices, ranging from the S&P 500 to Dow Jones Industrials to the Russell Micro-Cap Index in equities, to municipal and U.S. Treasury bonds, to real estate, commodities and more asset classes. He also surveys ETF-based asset class options.

• To finish up the first of his two asset allocation webinars, John incorporates risk metrics into the asset allocation discussion. He looks at beta as well as Sharpe Ratio for various asset classes, sector weights and investment styles for the largest equity mutual funds, and Moody’s/Fitch/S&P ratings as a percentage of the portfolio for the largest bond mutual funds. Don’t miss this expert review of the asset allocation process from one of the industry’s leading strategists!

This week, Zacks Equity Strategist Mayur Thaker, CFA discusses:

• The performance of our Earnings Certain (ECP) family of portfolios in comparison to the S&P 500. The underperformance of the ECP portfolios is not surprising given their defensive-oriented approach, but the magnitude of the difference is in large part due to the fact that 2023 was a “reversal year” for the S&P 500 after its -18% drop in 2022 when recession became the consensus (and when the ECP significantly outperformed the index).

• Mayur looks at some of the key reasons for the divergence in performance of the ECP portfolios compared to the S&P 500. He notes that while ECP delivered better earnings growth, the S&P 500 enjoyed significantly higher P/E multiple expansion throughout 2023. Other factors contributing to the S&P’s performance included excitement around Al, rising expectations of a soft economic landing, and the extreme concentration in the S&P 500—with 7 companies making up 30% of the index.

• Looking ahead, Mayur believes the ‘Goldilocks’ conditions that enhanced S&P 500 performance will end. In addition, because ECP companies are recession-resistant, high quality, durable businesses, they will outperform on both a risk-adjusted and absolute basis over the complete market cycle—as they have historically. To sum up, Mayur offers his ideal capital allocation for the year ahead which includes (surprise) the Zacks Earnings Certain Portfolio. Don’t miss this important and illuminating discussion.

This week, Zacks Chief Equity Strategist and Economist John Blank, PhD discusses:

• The top ETFs in the Consumer Discretionary sector—funds consisting of companies of companies that provide the “fun stuff” in life, from gaming to media, appliances to hotels, retail to automotive and more. This presentation, like our previous Consumer Discretionary stock analysis, highlights the rotation from buying “stuff” during the pandemic to buying services and experiences after it.

• After an overview of this ETF sector, including a look at the benchmark indexes, expense ratios, inception dates and changes in weekly AuM for key funds, John dives in to the ETF returns. He reviews charts for Dividend-Adjusted Price Returns and Returns Analysis, with special emphasis on the pre-Covid and post-Covid periods.

• John wraps up this week’s presentation with a look at valuations for these funds, including essential metrics like P/E, P/BV, and Beta. As always, he clearly defines what each metric means and its importance for investors. Don’t miss this expert analysis of the ETFs that cover the products and services we love to buy.

This week, Zacks Equity Strategist Mayur Thaker, CFA discusses:

• Arthur J. Gallagher & Co. (AJG), one the largest insurance brokerage and risk management consulting firms in the world. While they are a huge company, employing more than 50,000 people, they are not a household name like Allstate or Progressive, because they are not underwriters (and not really a consumer-facing company).

• Mayur chose to analyze Gallagher this week because he believes this company offers an excellent example of earnings quality. In fact, Gallagher was recently added to the Zacks Earnings Certain Portfolio (ECP). Mayur illustrates his point by walking through the 4 big metrics of quality: Linearity, Growth, Return on Invested Capital, and Free Cash Flow Conversion.

• See how Gallagher measures up on these metrics as Mayur explores the relevant numbers and charts. It’s your chance to learn more about a remarkably high-quality company that is not well-known among the general public. Don’t miss this week’s webinar for a deep dive into this global insurance behemoth.

This week, Zacks Chief Equity Strategist and Economist John Blank, PhD discusses:

• Key stocks that are the winners in Consumer Discretionary industries. These industries are vital to the U.S. economy—in fact John posits that these sectors, including Home Furnishings/Appliances, Leisure Services, Media, and more, are holding the American economy together. Also, this analysis illustrates the rotation from buying “stuff” during the pandemic to buying services and experiences after it.

• John introduces some of the noteworthy companies in these industries, from well-known names like Netflix (NFLX) and Marriott (MAR) to lesser-known but interesting stocks including SharkNinja (SN) and On Holding AG (ONON). John also spends some time on the “Big Six” multi-product consumer stocks: Target (TGT), Wal-Mart (WMT), Home Depot (HD), Lowes (LOW), Best Buy (BBY), and Amazon (AMZN).

• John’s analysis includes cash flow fundamentals such as Revenue F12M, EPS F12M and more, as well as balance sheet data like Capital Expenditures, Total Debt, Reinvestment Rate, and other metrics. As always, he clearly defines what each metric means for investors. Don’t miss this review of the essential stocks in the industries that produce the products and services we love to buy!

This week, Zacks Equity Strategist Mayur Thaker, CFA discusses:

• His latest assessment of what leading indicators say about the economy and market ahead. To make his case that these metrics all point to a recession in the first half of 2024, he highlights the inverted Treasury 10y-2y yield curve, U.S. manufacturing in recession for over a year, and more. Mayur uses measures of cyclical GDP and employment to illustrate the downward trends in the economy.

• After his thorough macro analysis, Mayur turns to the question of what these economic signs imply for stocks. He points out that The S&P 500 is still trading at a higher forward P/E than in previous 5% Fed funds rate environments—and on lower forward EPS growth expectations.

• Mayur’s conclusion is that the market is substantially overvalued and that analysts will mark down both FY 2023 and especially FY 2024 earnings forecasts. He notes that markets are priced for earnings growth at a forward P/E of 18-20x, and if that doesn’t happen, there will be a substantial drawdown. Finally, Mayur offers his ideal capital allocation for the low-growth environment he sees ahead.

This week, Zacks Equity Strategist Mayur Thaker, CFA discusses:

• Fastenal (FAST) , the largest nationwide distributor of fasteners such as nails, screws, rivets, adhesives and much more. Mayur presents a deep dive into why Fastenal is a great example of exceptionally high quality, and the kind of company Zacks looks for in our Earnings Certain Portfolio (ECP).

• Mayur begins by presenting how the company is structured, and how it makes money. Fastenal combines manufacturing facilities, distribution centers, a large store network, and even on-site vending machines at factories with a strong e-commerce presence. He also points out data that shows how Fastenal’s innovative practices save their customers significant time and money.

• Finally, Mayur gets into the proof of this company’s quality with a review of Fastenal’s financials. He highlights 4 key metrics for quality—Linearity, Growth, Return on Invested Capital, and Free Cash Flow—and notes that Fastenal’s ROIC is nearly 30%, compared to the average aggregate S&P figure of ~10%. Learn more about this remarkable high-quality company in this week’s webinar.

This week, Zacks Chief Equity Strategist and Economist John Blank, PhD discusses:

• Earnings trends in the Consumer Discretionary industries. After multiple sessions looking at Consumer Staples, John now turns to the fun stuff—from furniture and appliances to hotels and gaming, streaming and other media to hand tools, toys, games and more.

• This presentation begins with a look at spending fundamentals over the last 10 years—particularly the shift from discretionary goods during the pandemic to services afterwards. John analyzes macro data including consumer confidence, credit, personal consumption expenditures and other key data. He then turns to Consumer Discretionary industry and sub industry metrics. As always, he clearly defines what each metric means for investors.

• John examines revenue growth and earnings trends for the various sub-industries, going through various measures such as EBITDA F12M, EPS F12M, Cash Flow, Reinvestment Rate and others. He also breaks down key balance sheet ratio trends including Return on Tangible Equity, Return on Invested Capital, Asset Turnover, and more. Don’t miss this essential analysis of the industries that produce the items we love most!

This week, Zacks Chief Equity Strategist and Economist John Blank, PhD discusses:

• The top ETFs in the Consumer Staples sector—funds that usually (but not always) consist of companies that produce and sell food, beverages, apparel, publishing, soap and cosmetics, and other basics. This week’s talk concludes John’s 3-part analysis of the consumer staples sector.

• John begins with a look at the top 10 holdings in the leading ETFs, which not surprisingly include household names like Procter & Gamble (PG), Walmart (WMT), and Coca-Cola (KO), as well as European giants including Nestle ADR (NSRGY), Unilever (UL), L’Oreal S.A. (LRLCY) and many more.

• Then he zooms out to compare the dominant ETFs in this space, including XLP, VDC, IYK, IEV, and the food/beverage fund aptly named PBJ. As always, John walks through the essential charts and metrics related to fund performance and valuation, including total return, beta, P/E, P/BV and more. Don’t miss this expert analysis of the ETFs that cover the basics of daily life.

This week, Zacks Equity Strategist Mayur Thaker, CFA discusses:

• What leading indicators say about the economy and market ahead. Mayur walks through the data, including Chicago PMI, ISM Manufacturing and other gauges that show U.S. manufacturing is in decline; cyclical employment in YoY declines; an inverted and re-steepening Treasury 10y-2y yield curve; Leading Economic Index in deep contraction for 18 straight months; banks under continued tremendous pressure; and more.

• What do these indicators imply for stocks? The S&P 500 is still trading at a higher forward P/E than in previous 5% Fed funds rate environments—and on lower forward EPS growth expectations.

• Mayur’s conclusion is that the market is substantially overvalued and that analysts will mark down both FY 2023 and especially FY 2024 earnings forecasts. He notes that markets are priced for earnings growth at a forward P/E of 18-20x, and if that doesn’t happen, there will be a substantial drawdown. Finally, Mayur offers his ideal capital allocation for the low-growth environment he sees ahead.

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The views of Mayur Thaker, CFA are not necessarily the views of Zacks Investment Research.

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research is not a licensed securities dealer, broker or US investment adviser or investment bank. The S&P 500 is an unmanaged index.