Historically, in non-recessionary environments, cyclical sectors have outperformed by 2 percentage points on average in the 12 months after the Fed started cutting rates. By contrast, defensive sectors like utilities, health care, and consumer staples have underperformed by 3 percentage points on average in such environments. Usually, when that link doesn’t hold it’s because either inflation is high or economic growth is exceptionally strong. Last year, for example, the Consumer Price Index excluding food and energy (aka core CPI) was still close to an important 3.5% threshold level, around which rate cuts tend to have less of an impact on long-term interest rates. When the Fed has cut rates because it must—in response to a recession—returns have been poor. When the Fed has cut rates because it may—meaning inflation is low and growth is slowing, but not negative—returns have historically been strong.
- But personally I think the greater risk is actually the reverse—that economic growth could reaccelerate.
- Unlike other style factors, momentum is inherently adaptive, evolving to capture prevailing performance trends.
- See daily market data for the most popular stock market indexes (indices) along with our coverage of markets, recent news, and analysis.
- Also, its inorganic growth moves have strengthened its online lending platform.
- Equities may decline in value due to both real and perceived general market, economic, and industry conditions.
Align Technology(ALGN Quick QuoteALGN) Upgraded: 11/06/25
- Massive capex spending by U.S. tech giants to support the AI buildout is having implications for equity investors beyond the tech sector ― and well beyond the U.S.
- Bond yields have flowed higher to +4.13% on the 10-year and +3.60% on the 2-year.
- This could be a healthy environment for cyclical sectors, meaning sectors like technology, financials, and consumer discretionary, that tend to rise and fall in tandem with the economy.
- Such information may include, among other things, projections, forecasts, estimates of yields or returns, and proposed or expected portfolio composition.
End-to-end product lifecycle management, technological prowess, customer-oriented strategy and strong liquidity position are major growth drivers for Sanmina. We cover more than 1,000 of the most widely followed stocks in our Equity Research Reports. Each report features independent research from our analysts and provides in-depth analysis on a company, its fundamentals and its growth prospects. Equities may decline in value due to both real and perceived general market, economic, and industry conditions. Economies and financial markets are being transformed today by powerful mega forces, including digital disruption and AI, the energy transition, and geopolitical fragmentation that is rewiring supply chains. Tesla (TSLA) shareholders have approved a pay package that could see CEO Elon Musk make $1 trillion.
Flex benefits from growing data center exposure, strong global manufacturing scale, robust cash flow and strategic acquisitions. LendingTree’s reduced dependence on mortgage-related sources of revenues is expected to support its financials. Also, its inorganic growth moves have strengthened its online lending platform. Cboe’s growth strategy revolves around expanding product line across asset classes, broadening geographic reach, diversifying business mix with recurring revenues and leveraging technology.
But economic growth of that level, even if it’s accompanied by higher rates, usually hasn’t been a problem for the stock market. Many investors think of lower interest rates as bullish for stocks. But history shows that rate cuts alone don’t reliably predict market direction. Rather, why the Fed is cutting is crucial in determining how the market subsequently performs.
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But personally I think the greater risk is actually the reverse—that economic growth could reaccelerate. If growth were to tick up to a level of 4% to 4.5%, it would likely push long-term interest rates higher. The good news is that the inflation backdrop looks much better today than it did a year ago. And in my opinion, the odds are higher that rate cuts will translate into lower long-term yields, lower 30-year mortgage rates, and a revival of new and existing home sales. The ones most likely to beat the market and provide a positive return. The momentum factor’s headline performance has mirrored the strength of equity markets, sustaining an extended run alongside themes such as the surge of AI innovation and adoption.
Key Earnings Reports For Nov 07, 2025
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In other words, if you want to bet on which way stocks go from here, you have to decide if you think we’re heading into recession or not. Homebuilders are highly interest-rate sensitive and offer the closest correlation to home sales that you can find in the stock market. Not surprisingly given the slump in home sales, homebuilders have broadly underperformed over the last year-plus and were recently in their bottom quartile of relative valuation. This combination of falling rates and low relative valuations has historically delivered strong odds of outperformance—nearly 80% in similar periods since 1970.
Bond yields have flowed higher to +4.13% on the 10-year and +3.60% on the 2-year. You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security.
Investors Await Key Earnings Reports
Zacks may license the Zacks Mutual Fund rating provided herein to third parties, including but not limited to the issuer. The setup isn’t flawless, but those low valuations improve the risk-reward profile. For example, even if home prices decline from here (which typically is bearish for homebuilders), those valuation levels could help buffer the downside—with builders experiencing only 3 percentage points of underperformance in such periods historically. On the flip side, if home prices can simply hold their ground, history suggests the upside could be significant—with builders experiencing 30 percentage points of outperformance in similar periods historically. That kind of scenario might put a wrench in my thesis on homebuilder outperformance.
Reliance upon information in this material is at the sole discretion of the reader. The material was prepared without regard to specific objectives, financial situation or needs of any investor. The consumer discretionary industries can be significantly affected by the performance of the overall economy, interest rates, competition, consumer confidence and spending, and changes in demographics and consumer tastes.
Equity Market Outlook
This is not to say that recession is completely off the table as a possibility, but I believe recession risks are limited right now. And if the economy does keep growing, and the Fed does resume rate cuts next week, it could create very bullish conditions for US stocks. In fact, in past periods with similar conditions, stocks got a lift not only from rising expected earnings growth, but also from rising valuations like price-earnings ratios (PEs). What I find more convincing are certain leading indicators, meaning metrics that turn before the economy does. For example, CEO business confidence saw a big jump recently, with CEO expectations for conditions in their own industries rising by 30% over the previous quarter, according to data from The Conference Board and Haver Analytics.
Any Best gold etfs changes to assumptions that may have been made in preparing this material could have a material impact on the investment returns that are presented herein by way of example. The opinions expressed are as of October 2025, and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy.
Innovative Medicine unit is showing a growth trend, driven by existing products like Darzalex, Tremfya and Erleada and continued uptake of new launches, including Spravato, Carvykti and Tecvayli. The company’s hydraulic fracturing demand has recently fallen below the levels required to sustain regional oil production. Production delays at Boeing, higher interest expense, rising operating expenses and foreign currency risks hurt AL’s prospects. FirstEnergy’s growing regulated base and distribution & transmission lines are expected to boost earnings.