I didn't make a chart of this, but if you go to the Fidelity.com website, and do some digging, you can find the scorecard for the quarterly sector update for Q4, showing "strategists view" for sector overweight, neutral, and underweight. Even though the report is for Q4, it shows Q3 numbers.
The chart says to underweight communication services, consumer staples, energy, real estate and utilities. Overweight consumer discretionary, financials, industrials, and materials. Healthcare has a neutral weighting. The weighting didn't change from the prior quarter. I interpret underweight to be 'underperform' and overweight to 'over perform' but you may decide otherwise.
This information is forward looking and different than the historical performance shown in slide 2, inset A, of the below presentation.
Captions appear below the pictures in red, so be sure to scroll down far enough to read them.
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Here are the results for the five indices I follow except that dividends were not included. The Nasdaq with a gain of 35% was the best performer. The worst were the Dow transports. All of that is shown in the Actual 2019 column. The Predicted 2020 and 2024 columns shows what might happen going forward. This is not a guess. It's based on the indices having a 10-year cycle and averaging the years together For more details, click here. Notice that the technology-laden Nasdaq will suffer in 2020 and still be underwater in 2024. The transports will stage a nice comeback in 2024. I'll show charts of some of this later. The next slide discusses sector performance.
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According to Fidelity, the United States's economy is in a late stage expansion, as shown by the red circle on the chart. Inset A describes those sectors which thrive and those that don't under those economic conditions. Inset B shows how the sectors performed in 2019. Even though energy is supposed to do well in a late stage expansion, it didn't in 2019. So theory doesn't always match reality. It's been my experience that a trend in motion tends to remain in motion longer than people expect. I'm talking about information technology stocks. They performed best of the sectors shown for 2019 and yet the prior screen shows the Nasdaq dropping 13% in 2020. Hmm. Let's show some charts of past and future performance, starting with the Dow industrials.
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This is a chart of the forecasted Dow industrials (in red) versus the actual performance. Except for the dip going into March, the forecast did quite well. The ending prediction was a bit low but the trend stayed close to the actual through most of the year. The next chart shows the 2020 forecast
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This is the predicted path of the Dow industrials this year. It's a bumpy ride and it ends near where it started, if the forecast is correct. The Dow drops going into March and stages a recovery starting in July. Isn't there a saying to buy in May and go away? Try late May this year or early July. The next chart shows the forecast out to 2024.
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Here's the multi-year prediction for the Dow. The steep drop in 2021 is about 13%, well short of a 20% drop for a bear market. So expect a correction. You can swing trade the market from September 2021 going into March 2022 and do well. After that, buy again in July and ride the market higher. The next slide shows the Nasdaq.
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This is what the 13% forecasted drop for 2020 looks like. The composite peaks in March and fades through the year. What does the forecast out to 2024 look like? See the next slide.
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Here's the forecast out to 2024 for the Nasdaq composite. The index bottoms in 2021 and doesn't fully recover by the start of 2024. What about the S and P 500? (Next slide).
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This year, if the prediction is correct, the S and P will be flat. The next chart shows the prediction to 2024.
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Here's the forecast for the S and P out to 2024. You have to wait for the summer of 2022 before the market begins a sustained upward trend. If you think these forecasts are accurate or inaccurate, then look at the historical forecast here. Some did very well and others missed the mark.