Global stocks are gaining, if not at the pace of domestic equities. While the S&P 500 has risen 17% year to date, the EAFA index of large- and mid-cap stocks based in countries other than the U.S. and Canada has gained 9.5%. Over the past five years, the performance gap has been wider, with the S&P 500 advancing 94% compared to a 32% gain in EAFE. But the underperformance has given global stocks a valuation advantage, particularly in the area of dividends. Consider that the EAFE dividend yield of 2.9% is 170 basis points higher than the comparable S&P 500 dividend yield. We think global dividend stocks now offer opportunity, particularly given the endless speculation over the direction of interest rates in the U.S., which has created market-timing headaches for equity income investors, who have endured recent wide swings in prices for rate-sensitive equity in areas such as utilities, REITs and MLPs. In our view, investing in international income stocks is one way to increase portfolio diversification while reducing sensitivity to volatile U.S. interest rates. Investing in overseas stocks carries its own set of risks, including the impact of currency exchange and geopolitical turmoil. But there are also a number of positives in this asset class for U.S. investors, including a wide selection of companies that pay dividends, robust industry diversification, and, as we have mentioned, higher yields and lower valuations. Argus has recently boosted its global coverage, and recommends the following international dividend stocks, each of which has at least a long-term BUY rating from an Argus analyst. Note this list of approximately 25-30 companies offers exposure to eight of the 11 major industrial sectors. The list includes companies from 10 countries.

Cautiously Positive Outlook as Election Season Heats Up The stock market was in solid shape at mid-year 2024 and has continued to build on gains in July, which is typically the best summer month for equities. The rally has withstood signs of weakness in consumer spending, a tepid industrial economy, and slowing in employment; it even shrugged off an assassination attempt on former president Trump. The big market driver has been anticipation of cuts in the fed funds rate by the U.S. Federal Reserve. On 7/15/24, Fed Chair Jay Powell appeared to signal a willingness to begin the rate-cutting process before the U.S. reaches the targeted 2% inflation rate if the employment economy were to send worrisome signals. The Fed Chair said he 'won't be sending signals regarding any particular meeting,' but Wall Street will be stunned and disappointed if the Fed does not cut rates at its September FOMC meeting. Market Outlook for 2024 In 2023, the stock market broke out of its 2022 funk on the perception that inflation was in retreat, the Fed would wrap its rate-hiking campaign, and the supply chain would get back to its own 'new normal.' All of those things happened more or less, and the market rallied as anticipated. Whereas 2023 opened with inflation and the Fed rate-hiking campaign clearly on the downslope, the outlook for 2024 remains less clear even halfway through the year. The stock market is again rising to new all-time highs, yet the foundation of the advance seems tenuous. The stock market has had a big run, partly because corporate earnings are rebounding from a year of negative comparisons. While equity valuations appear attractive, stocks will appear pricey if earnings fail to grow as anticipated. The major geopolitical event of 2023 - the war between Israel and Hamas - has continued into 2024. In European nations such as France, nationalism is vying to displace leadership from traditionally socialist parties. Well after the end of pandemic lockdowns, China continues to experience uneven economic recovery that economists now recognize as demographic as well as cyclical. Despite these and other challenges, the global macro-environment appears moderately positive for U.S. stocks. Measures of the commercial and industrial economy - including PMIs, durable goods orders, industrial production, and small-business confidence - have moderated from high readings in the pandemic-recovery phase, while remaining at levels consistent with low-level growth. The lagged effects of higher rates are dragging on consumer and business spending and confidence. Recession appears unlikely, but could again become a risk if consumers stop spending. The outlook for the consumer economy is mixed. Rising wages and full employment are not sufficient to fully offset high prices and high interest rates, which are constraining everything from food purchases to home sales. We expect the U.S. economy to continue expanding in 2024, remaining on a narrow growth path in line with subdued population growth and higher productivity. Following 2.5% GDP growth in 2023, GDP growth is expected to moderate in 2024. Our forecast calls for sub-2% economic growth in the middle quarters of year and 2%-plus growth in 4Q24. For all of 2024, Argus is modeling 1.7% GDP growth, compared to 2.5% in 2023. Our forecast for 2025 is in the 2.0% range. The Fed is now ahead of the inflation curve: the federal funds rate remained at 5.25%-5.50% as of midyear 2024, while the core PCE Inflation Index was up 2.6% on an annual basis. With the FF/PCE gap now around the target range of 250 basis points, the Fed may feel increasing confidence in its ability to begin reducing rates. Inflation trends were more important than GDP trends for the stock market in 2023; their impact has started to fade as 2024 progresses. The new concern is that the long-beleaguered consumer has cut back on spending, particularly for durable goods. That could push the economy into a slow-growth phase or even recession. The spending disconnect appears to be growing between the generally older and more-prosperous top of the economy, and the generally younger middle- or bottom-cohort of the economy. Consumer sentiment and consumer confidence also show signs of splitting along generational and affluence lines, with confidence and sentiment rising in high-income consumers above 55 years old and declining for less-well-paid Millennials. June nonfarm payrolls along with prior-months revisions signal some cooling in the employment environment. The June unemployment rate of 4.1% was just one-tenth away from triggering the Sahm rule, considered a reliable recession indicator. In setting policy, the Fed is presumed to focus exclusively on achieving its 2% inflation target. Yet Chair Jay Powell in mid-July reminded Congress and investors that the Fed looks at 'both sides of its mandate,' including using policy to maximize employment. We believe pressures on the middle class and lower tiers of the economy may figure in the Fed's rate policy decision-making, particularly if the jobs economy were to continue to soften. As of mid-July, the CME FedWatch tool forecast a nearly 90% probability of a quarter-point rate cut at the September FOMC meeting. In a sign of increasing investor optimism, the FedWatch tool signaled a nearly 60% probability that the Fed funds rate would be 75 basis points lower at year-end 2024 than at present. We look for the dollar to continue to ease in 2024 from the cycle-high levels set in 2022, particularly if rates start to come down late in the year. The greenback increased 2% in 2023, yet still remains below the 2002 cycle high and generally has been trending lower since October 2023. Energy prices have been volatile: rising in fall 2023, declining in winter 2024, and rising again in spring 2024. We look for reasonable balance in the supply-demand equation to keep energy prices relatively stable. West Texas Intermediate (WTI) crude was at $83 per barrel at mid-year, roughly in line with 1Q24-end. Our forecast average price for WTI crude oil in 2024 is $80, in line with the 2023 average and down from $95 per barrel in 2022. The yield curve was inverted for all of 2023 and remained so for the first half of 2024. Fixed-income investors expect the Federal Reserve to start cutting rates but to proceed slowly: perhaps two cuts in 2024, and two-to-three cuts in 2025. We expect investors to push shorter-term interest rates lower over time, eventually returning the currently inverted yield curve to its normal upward slope. Following as-expected 1Q24 earnings, we maintained our 2024 estimate of S&P 500 continuing operations earnings of $247. Our estimate implies 9% growth from 2023, when S&P 500 earnings grew just 2%. Our EPS forecast for 2025 is for continuing-operations EPS in the mid-$260s, also implying high-single-digit growth. We expect U.S. stocks to continue outperforming global stocks, based on risk profiles and growth potential, tempered by valuation. In terms of market segments, we look for growth to continue to lead in 2024. We also continue to expect improved sector breadth as investors take profits in AI names and as rate-cut optimism lifts the broad market. Despite solid appreciation over the past year and a half, our stock valuation model remains favorable as earnings growth accelerates and as inflation and interest rates continue to come down. Our base case outlook for U.S. markets calls for the S&P 500 to appreciate an additional 5% across the second half of 2024. The year-end outlook remains uncertain in a presidential election year (typically the weakest of the four-year cycle). We anticipate that an expanding economy, growing earnings, and declining inflation and interest rates can offset the political uncertainty from the presidential election, resulting in the S&P 500 trading at or near all-time highs in 2024. Conclusion Our stock/bond valuation model suggests that bonds are slightly more favorable than stocks, although the difference is minor and stocks are still attractive. Our modified earnings-yield model takes into account earnings growth, short- and long-term corporate and Treasury fixed-income yields, inflation, and other factors. The output of our model is expressed in standard deviation to the mean, or sigma. The long-term average going back to 1960 is a sigma of 0.16, with a standard deviation of 0.97. Currently, stocks trade at a slight premium valuation of 0.19 sigma, in line with the long-term norm. Within our modified earnings-yield model, the decline in interest rates and the slowing in inflation along with our forecast for earnings acceleration have kept stock valuations from soaring out of sight during this one-and-a-half-year stock rally. The 2024 forward P/E is about 20-times S&P 500 continuing operations earnings, within a long-term range of 13- to 24-times. Digging a little deeper, we note that the current yield on the S&P 500 is around 1.3%, at the low end of the 10-year range of 1.3%-2.3%. However, the gap between the S&P 500 dividend yield and the 10-year Treasury yield is around three-quarters of the normal discount, signaling value. Given the current yield along with our forecast for high-single to possibly low-double digit EPS growth for 2024 and 2025, the total-return outlook for the S&P 500 is better than it has been since pre-pandemic days. As inflation and interest rates come down further in the 2024 second half and in 2025, we expect our stock/bond valuation model to tilt more toward stocks. Our year-end 2024 target for the S&P 500 is 5,800, and our trading range is 5,200-6,200.

The Portfolio Selector features the Argus Focus List, a group of 30 "best idea" stocks generated and regularly updated by Argus' analysts and investment policy committee. It also includes the director of research’s monthly investment strategy column, stock recommendations and sector picks, economic forecasts, and an asset allocation model. This month, the Focus List additions are DuPont de Nemours Inc (DD); GE Vernova Inc. (GEV); Palantir Technologies Inc (PLTR); Dicks Sporting Goods, Inc. (DKS) and the Focus List deletions are ASML Holding NV (ASML); Linde Plc. (LIN); Oshkosh Corp (OSK); TJX Companies, Inc. (TJX).

U.S. stocks rose on Monday morning following last week's selloff. On the economic calendar this week are flash PMI readings for April on Tuesday, durable goods orders on Wednesday, U.S. 1Q GDP and pending home sales on Thursday, and consumer sentiment on Friday. Tesla shares are down ahead of its quarterly earnings tomorrow on news that the company cut prices by up to $2000 on several of its vehicles. The Dow was up 0.4%, the S&P 500 rose 0.5% and the Nasdaq gained 0.6%. Crude oil is trading above $83 per barrel and gold fell $64 to $2349 per ounce.

Stocks headed higher on Wednesday morning ahead of this week's economic data. Both the S&P 500 and Nasdaq are tracking for record highs, helped by stocks such as Netflix (NFLX), ASML Holdings (ASML) and Advanced Micro Devices (AMD). The Dow rose 0.3%, the S&P 500 was up 0.7% and the Nasdaq gained 1.2%. Crude oil traded above $75 per barrel, while gold fell $8 to $2018 per ounce.

Argus has published its latest Portfolio Selector, which features its popular Focus List. Each month, Director of Research Jim Kelleher, CFA, surveys the team of Argus Research industry analysts for their timeliest recommendations out of the company's fundamental universe of approximately 500 stocks. The Focus List typically includes 30 stocks: turnover is high, as Jim typically adds three or four new stocks per month. Below are the latest additions, all of which are rated BUY at Argus.

The Portfolio Selector features the Argus Focus List, a group of 30 "best idea" stocks generated and regularly updated by Argus' analysts and investment policy committee. It also includes the director of research’s monthly investment strategy column, stock recommendations and sector picks, economic forecasts, and an asset allocation model. This month, the Focus List additions are ServiceNow Inc (NOW); ASML Holding NV (ASML); United Rentals, Inc. (URI); Target Corp (TGT) and the Focus List deletions are Canadian Pac Kansas City Ltd (CP); Salesforce Inc (CRM); D.R. Horton Inc. (DHI); Seagate Tech Hldgs Pl (STX).

Here is the list of the Top Picks for 2024 from the Argus team of analysts. The team is deeply experienced, as each analyst has spent ,on average, 25 years on Wall Street and 15 years at Argus Research. As such, our analysts are extremely well-versed in our proprietary fundamental six-point system and the sectors they cover. They also have solid relationships with many of the management teams they cover. But they do not operate in a vacuum. An Investment Policy Committee (IPC) comprised of Director of Research Jim Kelleher, CFA; President John Eade; Chief Compliance Officer & Senior Financial Analyst Kevin Heal; and Director of Financial Institutions Research Steve Biggar provide macro outlooks for the economy, interest rates, earnings, and the stock market. The IPC reviews all proposed ratings changes. Our list below is organized by sector.

Global stocks are picking up the pace. While the S&P 500 has jumped almost 11% in the past month, the EAFA index of large- and mid-cap stocks based in countries other than the U.S. and Canada has risen 10%. Over the past six years, the performance gap has been wider, with the S&P 500 advancing 12% compared to a 7% gain for the EAFE. But the underperformance has given global stocks a valuation advantage, particularly in the area of dividends. The EAFE dividend yield of 2.4% is 80 basis points higher than the comparable S&P 500 dividend yield. We think global dividend stocks now offer opportunity, particularly given the endless speculation over the direction of interest rates in the U.S., which has created market-timing headaches for equity income investors. Those investors have endured recent wide swings in prices for rate-sensitive equity sectors such as Utilities, REITs and MLPs. In our view, investing in international income stocks is one way to increase portfolio diversification while reducing sensitivity to volatile U.S interest rates. Investing in overseas stocks carries its own set of risks, including the impact of currency exchange and geopolitical turmoil. But there are also a number of positives in this asset class for U.S. investors, including a wide selection of companies that pay dividends, robust industry diversification, and, as we have mentioned, higher yields and lower valuations. Argus has recently boosted its global coverage, and recommends the following international dividend stocks, each of which has at least a long-term HOLD rating from an Argus analyst.

Market Outlook for 2023

The yield curve has been inverted for months. But in recent weeks, the entire curve has moved higher. The primary culprit was the rating cut on U.S. Treasuries by Fitch in late July. Fitch cited the growing U.S. sovereign-debt level; current high interest rates, which increase the amount of money the government needs to spend to service the debt; and the dysfunctional U.S. Congress, which narrowly averted a Treasury default in May and only kicked the debt-ceiling-crisis can down the road for a couple of years. These are all reasonable points. Even so, we expect the Treasury market to calm in the months ahead and for interest rates to move lower through 2024. Our first point involves inflation. We think the Federal Reserve is done with its rate-hike campaign, after lifting the federal funds rate from a rock-bottom 0.0% to the current level of 5.25%-5.50%, which is now above the core PCE inflation rate of 4.1% and moves the Fed in front of the inflation curve. The central bank's goal is to reduce inflation to 2.0%, so we anticipate that it will keep short-term rates high through 2023. But as inflation falls, the Fed will be in position to start reducing rates in 2024. Second, we note that U.S. Treasury rates in the 4%-5% range are extremely attractive to foreign investors, who see their own rates in the 1%-3% range, and we expect global demand to keep a lid on longer-term bond yields. Finally, though Federal interest payments as a percentage of GDP have risen to 1.9% from 1.5% a year ago, they remain below the historical average of 2.1%, implying that the risks to investing in U.S. Treasuries remains low, despite the recent downgrade.

Market Outlook for 2023

Bonds have not provided a safe haven over the past year, with the benchmark Core U.S. Aggregate Bond Index down 4% for the trailing 12 months. Still, we anticipate improved performance from fixed income over the next few quarters. For this cycle, we think the worst of the damage at the long end of the curve already has been done. Our forecasts for the yield on the 10-year Treasury Note call for an increase of approximately 15 basis points from current levels through 2023, compared to the 200-basis-point jump that has occurred since 1Q22. At the short end of the curve, we look for 2-year rates to decline over the next two years. In the wake of the recent CPI and jobs reports, as well as recent speeches from members of the Federal Reserve, we believe the Fed will hike the federal funds rate one more time before moving to the sidelines and hoping that inflation continues to decline. What will this series of hikes do to the economy? Right now, the economy is in a growth mode and may be able to handle higher rates for a few more months. However, in light of the rate hikes already in place, the unemployment may soon start to rise toward 5.0%, stalling growth in the consumer sector. What will the hikes do to the yield curve? Right now, the 2-to-10 section of the yield curve is inverted, as investors already believe the Fed has gone too far and may be pushing the economy into recession. If the central bank can avoid a downturn -- no easy task now that GDP has fallen for two of the past three quarters -- the yield curve should again slope upward, which is our forecast for the end of next year.

The S&P 500 (SPX) continues to trend toward several important pieces of resistance following the rally off the March 13 intraday low of 3,809. First, the SPX is right at trendline resistance off the peak since August. Back in the latter part of February, the index had broken down out of a bearish wedge, backtested the lower line of the pattern, and continued lower. From the February 2 closing high to the recent closing low, the index gave up almost 8%, or 324 points. Based on the size of the wedge, a minimum target was down at 3,656 -- which the index didn't come close to hitting.

We recently raised our rating on the Technology sector to Over-Weight from Market-Weight. As interest rates start to fall, IT demand in enterprise and data center markets is holding up. And mounting interest in ChatGPT could herald the age of AI, which could be a huge industry driver. Over the long term, we expect the Technology sector to benefit from pervasive digitization across the economy, greater acceptance of transformative technologies, and the development of the Internet of Things (IoT). Healthy company and sector fundamentals are also positive. For individual companies, these include high cash levels, low debt, and broad international business exposure. The sector is outperforming the market thus far in 2023, with a gain of 12.4%. Tech underperformed the market in 2022, with a loss of 28.9%, and outperformed in 2021, with a gain of 33.4%. The P/E ratio on projected 2023 earnings is 23, above the market multiple. Earnings are expected to grow 14.5% in 2023 after having fallen 3.3% in 2022. Earnings rose 37.9% in 2021 and 7.7% in 2020. The sector's debt ratios are below the market average, as is the average dividend yield of 0.5%. Here is how we use our analysts' Technology sector ideas in our Focus List and Model Portfolios.

The stock market has pretty much been dancing to the bond market's tune in 2023. Bond yields decline, and stocks rise as they did in January. Bond yields rise, and stocks fall as they have done in February. Investors may be "getting used to" higher rates, because stocks have held a portion of their January gains even with the return of interest rates to the beginning-of-year-levels.

Global stocks are on a run. While the S&P 500 has jumped almost 8% year-to-date, The EAFA Index of large- and mid-cap stocks based in countries other than the U.S. and Canada has risen 9%. Over the past six months, foreign stocks also have outperformed, climbing 11% versus a 1% decline by the U.S. market. The story is different over the past five years, as the S&P 500 has risen 50% and global stocks have fallen 1%. Even so, the long outperformance has given global stocks a valuation advantage, particularly in the area of dividends. The EAFE dividend yield of 2.7% is 100 basis points higher than the comparable S&P 500 dividend yield. We think global dividend stocks now offer opportunity, particularly given the endless speculation over the direction of interest rates in the U.S., which has created market-timing headaches for equity income investors - who have endured recent wide swings in prices for rate-sensitive equity sectors such as utilities, REITs and MLPs. In our view, investing in international income stocks is one way to increase portfolio diversification while reducing sensitivity to volatile U.S. interest rates. Investing in overseas stocks carries its own set of risks, including the impact of currency exchange and geopolitical turmoil. But there are also a number of positives in this asset class for U.S. investors, including a wide selection, robust industry diversification, and, as we have mentioned, higher yields and lower valuations. Argus recently boosted its global coverage, and recommends the following international dividend stocks, each of which has at least a long-term BUY rating from an Argus analyst. This list of approximately 25 companies offers exposure to eight of the 11 major industrial sectors. The list includes companies from 10 countries.

Checking in on the intermediate- to longer-term picture, we are starting to see some positive developments. Yes, the S&P 500 busted above its 200-day average -- but that average is still declining, and we prefer a rising 200-day. The 50-day crossed above the 200-day (slightly) and the 10-week crossed above the 40-week, which are bullish signs and have a high probability of signaling a trend change from bearish to bullish.

Is the Fed Using the Right Playbook?

Previously, we have talked about the bullish implications of a falling U.S. Dollar Index for emerging markets, as well as the positives seen in precious metals and other commodities. While the emerging market ETF (EEM) has seen a nice advance since October, other country ETFs have exploded in recent months. While we are not surprised by the EEM rally, a review of other country-specific stock markets caught us off guard.

Each December, Argus surveys its team of analysts, seeking their best ideas for the upcoming year. The Argus Research team draws on its experience (the average analyst has 18 years of Wall Street experience and 10 year at Argus), as well as the company's proprietary six-point research framework and earnings and valuation models to make the calls. Argus analysts cover the waterfront (every sector from Energy to Healthcare to Consumer to Technology), so each sector is represented. This year's list includes some long-time favorites, as well as some recent upgrades and new initiations. The list includes mostly large-caps and mid-caps, and both growth and value stocks. We will be going over the list in more detail during our January webinar and detailing why each stock has been selected by the covering analyst. In the interim, more information on each of these BUY-rated stocks is available on our website.

The Portfolio Selector features the Argus Focus List, a group of 30 "best idea" stocks generated and regularly updated by Argus' analysts and investment policy committee. It also includes the director of research’s monthly investment strategy column, stock recommendations and sector picks, economic forecasts, and an asset allocation model. This month, the Focus List additions are Corteva Inc (CTVA); Dell Technologies Inc (DELL); Exxon Mobil Corp. (XOM); Thermo Fisher Scientific Inc. (TMO) and the Focus List deletions are Linde Plc (LIN); Lilly(Eli) & Co (LLY); ASML Holding NV (ASML); EOG Resources, Inc. (EOG).

Inflation Marches on as the Market Tries to Stabilize

In this edition, Putting Chips on Chipmaker ASML, Okta's Core Is Strong, Adobe's Acquisition, and Roblox, National Instruments, and FedEx

Since late June, Argus Research has launched coverage of five new companies. Although we initiated coverage of three of these companies with near-term HOLD ratings, they are all substantial players within their sectors and we want to keep an eye on them. The additions brought our fundamental Universe of Coverage to more than 500 leading U.S. and international companies. We cover stocks in all of the S&P 500 sectors - from Technology to Utilities and from Energy to Healthcare. Generally, we follow the Top 200 most-widely-held stocks, sourced from our sister company Vickers Stock Research (which collects institutional ownership data from the U.S. Securities and Exchange Commission). After that, we identify what we believe are the next 300 leading U.S. and international companies to round out our list. Our Universe of Coverage is dynamic and growing. We continually add stocks and often get ideas from our clients. Here are our most recent additions.

Dividends are supposed to lend stability to a portfolio. However, U.S.-based income investors have experienced a high degree of volatility in recent years, as the Federal Reserve since 2018 has embarked on two campaigns to raise interest rates, sandwiched around a desperate program that lowered the federal funds rate to zero in order to help the economy recover from the pandemic. The endless speculation over the direction of rates has created market-timing headaches for equity income investors. They have endured wide swings in prices for rate-sensitive equity sectors such as Utilities, REITs and MLPs. In our view, investing in international income stocks is one way to increase portfolio diversification while reducing sensitivity to volatile U.S interest rates. Investing in overseas stocks carries its own set of risks, including the impact of currency exchange and geopolitical turmoil. But there are also a number of positives in this asset class for U.S. investors, including a wide selection, robust industry diversification, higher yields, and lower valuations. Argus has recently boosted its global coverage, and recommends the following international dividend stocks. Note this list of 25 companies offers exposure to eight of the 11 major sectors. The list includes companies from 10 countries.

Stocks were mixed on Thursday morning following earnings reports from Tesla, AT&T, and United Airlines, and new weekly employment data. Investors also weighed a rate hike in Europe. The European Central Bank announced a 50-basis-point hike in its benchmark interest rate, more than the 25-basis-point increase that had been expected and the first hike since 2011. The move sent the euro higher against the dollar, though the gains were tempered by political turbulence in Italy following the resignation of Prime Minister Mario Draghi. The Dow fell 0.4%, the S&P rose 0.2%, and the Nasdaq rose 0.4%. Crude oil fell nearly 4% to $96 per barrel, while gold traded near $1710 per ounce.

Bonds have not provided a safe haven in 2022, with the benchmark Core U.S. Aggregate Bond Index down 10% year-to-date. We think the worst of the damage at the long end of the curve for this cycle has been done. Our forecasts for the 10-year Treasury note call for an increase of approximately 50-75 basis points through 2023, compared to the 150-basis-point jump in the first six months of this year. At the short end of the curve, we look for an aggressive mover higher through 2022. It is our view that the Fed hikes the federal funds rate 75 basis points at its meeting next week. In September, we expect a 50-basis-point hike, while in 4Q22, when the mid-term elections occur, we think the Fed will push through two more 25-basis-point increases (November and December). At that point, the federal funds rate could be 2.50%-2.75%, in line with the Fed's estimate for inflation by year-end 2022. Right now, the economy is in a solid growth mode and can handle higher rates for at least another quarter or two. The yield curve is inverted, as investors expect the Fed to go too far and push the economy into recession. If the central bank can avoid a two-quarter downturn (as it did for more than 10 years last decade), the yield curve should again slope upward, which is our forecast for next year. How will modestly higher long-term rates impact the stock market? They will limit most appreciation possibilities from multiple expansion. Earnings will drive returns going forward.

Argus has published its latest Portfolio Selector, which features its popular Focus List. Each month, Director of Research Jim Kelleher, CFA, surveys the team of Argus Research industry analysts for their timeliest recommendations out of the company's fundamental universe of approximately 500 stocks. The Focus List typically includes 30 stocks: turnover is high, as Director of Research Kelleher typically adds three or four new stocks per month. Below are the latest additions, all of which are rated BUY at Argus.

The Portfolio Selector features the Argus Focus List, a group of 30 "best idea" stocks generated and regularly updated by Argus' analysts and investment policy committee. It also includes the director of research’s monthly investment strategy column, stock recommendations and sector picks, economic forecasts, and an asset allocation model. This month, the Focus List additions are AbbVie Inc (ABBV); Monster Beverage Corp. (MNST); ASML Holding NV (ASML); Sempra Energy (SRE); Morgan Stanley (MS) and the Focus List deletions are Sysco Corp. (SYY); Lam Research Corp. (LRCX); Lazard Ltd. (LAZ); Moderna Inc (MRNA).

We think it is unlikely that the U.S. is currently in a recession, but many economists are forecasting a contraction in GDP in 2023. They contend that the Fed will tighten economic policy too aggressively. Certainly, equity investors have taken this position, with the S&P 500 in a bear market. So what can we expect, if a contraction occurs? We have studied the six recessions in the U.S. since 1980. Five of them were "normal" pullbacks, while the sixth was the recent pandemic-induced decline. Averaging results of those first five, we find that recessions typically last 3-4 quarters, and the average peak-to-trough decline in output is 5.6%. Unemployment typically rises 250 basis points, which would lift the current rate back above 6.0%. Treasury yields typically fall during recessions, as often the Fed begins to lower rates in an attempt to revive the economy. On average, the change in the 10-year Treasury yield from start to finish during a recession is 60 basis points. So those are averages. Is the current economy an "average" economy? In many ways, it is not. Unemployment is lower than at the start of previous recessions, so the consumer sector is in pretty good shape. Treasury yields are lower than average as well, which could provide some relief for households and homebuyers. We are not yet forecasting a recession in 2023, but if one does occur, based on the current fundamentals, we would expect it to cause less-than-average damage to the economy.

The trading week ended June 24 was a strong one for stocks. But from a technical perspective and using our own interpretation, it is far too early to call the bottom as there is just not enough of the needed evidence.

This edition features digital ad spending outlook; pandemic's impact on payments industry; chipmakers; and notes from Boeing, Amazon, and Curaleaf.

Founded in 1984 and based in the Netherlands, ASML is a leading manufacturer of photolithography systems used in the manufacturing of semiconductors. Photolithography is the process in which a light source is used to expose circuit patterns from a photomask onto a semiconductor wafer. ASML's products are used at every major semiconductor manufacturer, including Intel, Samsung, and Taiwan Semiconductor Manufacturing.