The market is entering a seasonally strong period through the end of the year, as was recently pointed out by The Market Ear. The chart below shows the average path of index returns over the past 20 years. With that, we return to what’s been working this year for a potential rally into year-end. Mega Cap Growth (+43.6% YTD) and Large Cap Growth (+22.8% YTD) are the two best-performing factors, so we screened the S&P 500 for momentum among that cohort.
Screen Criteria
- S&P 500 member with Market Cap > $200B
- Price above 50dma
- Price 0-5% below 52-week high
- YTD Performance > S&P 500 (19%)
- RSI 55-65 (Not Overbought)
All five stocks have delivered stellar performance YTD. While they have momentum on their side right now, we caution that their RSIs are all approaching overbought levels. Thus, they may experience a pullback before beginning a rally through Christmas. With market performance concentrated in such a small group of stocks this year, managers will likely be focused on closing the gap to their benchmarks heading into the year-end. This chasing has the potential to drive outperformance for this year’s winners and underperformance for the dogs.
Company Summaries
Costco Wholesale Corporation (COST)
Alphabet Inc. (GOOG)
Amazon.com, Inc. (AMZN)
Meta Platforms, Inc. (META)
Broadcom Inc. (AVGO)
Five for Friday
Five for Friday uses stock screens to produce five stocks that we expect will outperform if a particular investment theme plays out in the future. Investment themes may be relevant to the current or expected market, industry and/or economic trends. Investment themes may not always represent our current forecast.
Disclosure
This report is not a recommendation to buy or sell the named securities. We intend to elicit ideas about stocks meeting specific criteria and investment themes. Please read our disclosures carefully and do your own research before investing.
Michael Lebowitz, CFA is an Investment Analyst and Portfolio Manager for RIA Advisors. specializing in macroeconomic research, valuations, asset allocation, and risk management. RIA Contributing Editor and Research Director. CFA is an Investment Analyst and Portfolio Manager; Co-founder of 720 Global Research.
Follow Michael on Twitter or go to 720global.com for more research and analysis.
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