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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.