{"id":3014,"date":"2023-01-27T16:57:54","date_gmt":"2023-01-27T16:57:54","guid":{"rendered":"http:\/\/blog.valuengine.com\/?p=3014"},"modified":"2023-01-27T17:00:02","modified_gmt":"2023-01-27T17:00:02","slug":"rotating-regimes-what-to-plan-for-in-2023","status":"publish","type":"post","link":"http:\/\/blog.valuengine.com\/index.php\/rotating-regimes-what-to-plan-for-in-2023\/","title":{"rendered":"Rotating Regimes \u2013 What to Plan For in 2023"},"content":{"rendered":"

In general, the 2022 US Stock Market was a conflagration that wiped out almost everything in its path with the exception of a few industries and ETFs.\u00a0<\/span><\/p>\n

The ETF reports on ValuEngine for ETFs that follow market benchmarks provide a side benefit in writing market analyses.\u00a0 They are a window to implicit forecasts for 3-, 6- and 12-month forecasts that the VE models make for each benchmark\u2019s ETF portfolio.\u00a0 This is because the ratings and projections combine bottom-up constituent analysis with analyses of the historical price movements of the ETF in different market environments. \u00a0 This empowers us to both look back and share our model\u2019s views on that which lies ahead.\u00a0\u00a0<\/span><\/p>\n

All 5,000 stocks, 16 sector groups, 140 industries, and 500 ETFs have been updated.<\/b><\/h5>\n
Two week free trial:\u00a0<\/b>www.ValuEngine.com<\/b><\/a>\u00a0\u00a0<\/b><\/h5>\n

The benchmark indexes and ETFs analyzed here are:<\/span><\/p>\n

    \n
  1. The S&P 500 Index representing US Large Cap, the ETF is iShares\u2019 SPY;<\/span><\/li>\n
  2. The S&P 400 MidCap Index representing US MidCap; the ETF is SPDR\u2019s MDY;<\/span><\/li>\n
  3. The Russell 2000 Index representing US Small Cap; the ETF is iShares\u2019 IWM<\/span><\/li>\n
  4. The Russell 1000 Large Cap Growth Index; the ETF is iShares\u2019 IWF;<\/span><\/li>\n
  5. The Russell 1000 Large Cap Value Index; the ETF is iShares\u2019 IWD;<\/span><\/li>\n
  6. The Nasdaq-100, constructed as an index using the top 100 non-financial stocks with primary listing on the Nasdaq, but now regarded as the premier US Big Tech Index; the ETF is Invesco QQQ.\u00a0<\/span><\/li>\n<\/ol>\n

    All historical data are as of 12\/31\/2022.<\/span><\/p>\n

    Current ValuEngine reports on these stocks or ETFS can be viewed\u00a0<\/b>HERE<\/b><\/a><\/h5>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
    <\/td>\nIWD<\/b><\/td>\nIWF<\/b><\/td>\nIWM<\/b><\/td>\nMDY<\/b><\/td>\nQQQ<\/b><\/td>\nSPY<\/b><\/td>\n<\/tr>\n
    Market Index Being Tracked<\/span><\/td>\nRussell Large Cap Value<\/b><\/td>\nRussell Large Cap Growth<\/b><\/td>\nRussell 2000 Small Cap<\/b><\/td>\nS&P Midcap<\/b><\/td>\nNasdaq 100\u00a0<\/b><\/td>\nS&P 500<\/b><\/td>\n<\/tr>\n
    ValuEngine Rating<\/b><\/td>\n2<\/b><\/td>\n4<\/b><\/td>\n4<\/b><\/td>\n2<\/b><\/td>\n4<\/b><\/td>\n3<\/b><\/td>\n<\/tr>\n
    Forecast 3-mo. Price Return<\/b><\/td>\n1.32%<\/span><\/td>\n1.55%<\/b><\/td>\n0.9%<\/span><\/td>\n1.03%<\/span><\/td>\n1.25%<\/span><\/td>\n1.48%<\/span><\/td>\n<\/tr>\n
    Forecast 6-Mo. Price\u00a0<\/b><\/td>\n4.01%<\/span><\/td>\n4.56%<\/b><\/td>\n2.27%<\/span><\/td>\n2.91%<\/span><\/td>\n4.36%<\/span><\/td>\n4.40%<\/span><\/td>\n<\/tr>\n
    Forecast 1-yr. Price Return<\/b><\/td>\n-1.26%<\/span><\/td>\n0.63%<\/b><\/td>\n0.19%<\/span><\/td>\n-0.73%<\/span><\/td>\n0.07%<\/span><\/td>\n-0.33%<\/span><\/td>\n<\/tr>\n
    Historic 1 mo. Price Return<\/span><\/td>\n-4.62%<\/span><\/td>\n-7.90%<\/span><\/td>\n-6.94%<\/span><\/td>\n-5.89%<\/b><\/td>\n-9.01%<\/span><\/td>\n-6.19%<\/span><\/td>\n<\/tr>\n
    Historic 3 mo. Price Return<\/span><\/td>\n11.52%<\/span><\/td>\n1.83%<\/span><\/td>\n5.72%<\/span><\/td>\n10.24%<\/b><\/td>\n-0.12%<\/span><\/td>\n7.07%<\/span><\/td>\n<\/tr>\n
    Historic 6 mo. Price Return<\/span><\/td>\n4.61%<\/span><\/td>\n-2.04%<\/span><\/td>\n2.95%<\/span><\/td>\n7.09%<\/b><\/td>\n-4.59%<\/span><\/td>\n1.37%<\/span><\/td>\n<\/tr>\n
    2022 Calendar <\/b>Price Return\u00a0<\/span><\/td>\n-9.72%<\/b><\/td>\n-30.25%<\/span><\/td>\n-21.79%<\/span><\/td>\n-14.37%<\/span><\/td>\n-32.58%<\/span><\/td>\n-19.68%<\/span><\/td>\n<\/tr>\n
    Historic 5-Yr Ann. Price Return<\/span><\/td>\n5.13%<\/span><\/td>\n11.06%<\/span><\/td>\n3.97%<\/span><\/td>\n6.15%<\/span><\/td>\n12.09%<\/b><\/td>\n8.61%<\/span><\/td>\n<\/tr>\n
    Volatility<\/span><\/td>\n19.38%<\/span><\/td>\n20.94%<\/span><\/td>\n24.07%<\/span><\/td>\n22.62%<\/span><\/td>\n21.93%<\/span><\/td>\n18.94%<\/span><\/td>\n<\/tr>\n
    Sharpe Ratio\u00a0<\/span><\/td>\n0.20<\/span><\/td>\n0.44<\/span><\/td>\n0.11<\/span><\/td>\n0.22<\/span><\/td>\n0.49<\/b><\/td>\n0.38<\/span><\/td>\n<\/tr>\n
    Beta<\/span><\/td>\n0.98<\/span><\/td>\n1.07<\/span><\/td>\n1.16<\/span><\/td>\n1.13<\/span><\/td>\n1.10<\/span><\/td>\n1.01<\/b><\/td>\n<\/tr>\n
    # of Stocks<\/span><\/td>\n853<\/span><\/td>\n513<\/span><\/td>\n1948<\/span><\/td>\n401<\/span><\/td>\n100<\/span><\/td>\n503<\/span><\/td>\n<\/tr>\n
    Undervalued by VE %<\/span><\/td>\n41%<\/span><\/td>\n45%<\/span><\/td>\n69%<\/b><\/td>\n45%<\/span><\/td>\n41%<\/span><\/td>\n32%<\/span><\/td>\n<\/tr>\n
    P\/B Ratio<\/span><\/td>\n2.5<\/span><\/td>\n9.8<\/span><\/td>\n2.1<\/b><\/td>\n2.4<\/span><\/td>\n6.6<\/span><\/td>\n4.0<\/span><\/td>\n<\/tr>\n
    P\/E Ratio<\/span><\/td>\n16.3<\/span><\/td>\n27.5<\/span><\/td>\n27.9<\/span><\/td>\n14.1<\/b><\/td>\n25.3<\/span><\/td>\n19.8<\/span><\/td>\n<\/tr>\n
    Div. Yield<\/span><\/td>\n2.1%<\/b><\/td>\n0.9%<\/span><\/td>\n1.4%<\/span><\/td>\n1.4%<\/span><\/td>\n0.8%<\/span><\/td>\n1.6%<\/span><\/td>\n<\/tr>\n
    Expense Ratio<\/span><\/td>\n0.18%<\/span><\/td>\n0.18%<\/span><\/td>\n0.19%<\/span><\/td>\n0.22%<\/span><\/td>\n0.20%<\/span><\/td>\n0.09%<\/b><\/td>\n<\/tr>\n
    Largest Holding Pct.<\/span><\/td>\nExxon Mobil Corp <\/span>(XOM)<\/b><\/p>\n

    2.44%<\/span><\/p>\n

    VE3<\/b><\/td>\n

    		Apple <\/span>(AAPL)<\/b><\/p>\n

    <\/b>11.27%<\/span><\/p>\n

    VE3<\/b><\/td>\n

    		Crocs Inc <\/span>(CROX)<\/b><\/p>\n

    0.32%<\/span><\/p>\n

    VE1<\/b><\/td>\n

    		Fair Isaac Inc <\/span>(FICO)<\/b>,<\/span><\/p>\n

    1.28%<\/span><\/p>\n

    VE4<\/b><\/td>\n

    		Microsoft <\/span>(MSFT)<\/b><\/p>\n

    11.95% <\/span><\/p>\n

    VE3<\/b><\/td>\n

    		Apple <\/span>(AAPL)<\/b><\/p>\n

    5.98%<\/b><\/p>\n

    VE3<\/b><\/td>\n<\/tr>\n

    Index Provider<\/span><\/td>\nFTSE Russell Indices<\/span><\/td>\nFTSE Russell Indices<\/span><\/td>\nFTSE Russell Indices<\/span><\/td>\nS&P Dow Jones<\/span><\/td>\nNasdaq<\/span><\/td>\nS&P Dow Jones<\/span><\/td>\n<\/tr>\n
    ETF Sponsor<\/span><\/td>\n iShares by Blackrock<\/span><\/td>\n iShares by Blackrock<\/span><\/td>\n iShares by Blackrock<\/span><\/td>\nSPDRs by SSgA<\/span><\/td>\nInvesco<\/span><\/td>\nSPDRs by SSgA<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n
    Current ValuEngine reports on these stocks or ETFS can be viewed\u00a0<\/b>HERE<\/b><\/a><\/h5>\n

    The 6-month return represents the second half of 2022.\u00a0 Comparing it to the entire year on the data below and\/or our July column showing little differentiation during the carnage of the first six months.\u00a0 It is evident that some segments ended 2022 much better than others.\u00a0 In particular, the Russell 1000 Value ETF (<\/span>IWD<\/b>), and the MidCap ETF (<\/span>MDY<\/b>) both finished robustly in positive territory while the Russell growth stock ETF (<\/span>IWF<\/b>)<\/span> and <\/span>QQQ<\/b>, the Nasdaq-100 ETF, continued to be punished.\u00a0 Somewhat surprisingly <\/span>SPY, <\/b>the S&P 500 Trust, finished in positive territory, albeit barely. Rounding out the field, <\/span>IWM, <\/b>the ETF for the small cap 2000, recouped nearly 3% of its first half losses. Altogether, for the year, there were varying degrees of carnage.\u00a0 Rounding off the numbers:<\/span><\/p>\n

    IWD<\/b> Russell Value<\/span> down 10%<\/span><\/p>\n

    MDY<\/b> S&P MidCap<\/span> down 15%<\/span><\/p>\n

    SPY<\/b> S&P 500: \u00a0 \u00a0 \u00a0 <\/span> down 20%<\/span><\/p>\n

    IWM<\/b> Russell Small Cap<\/span> down 20%<\/span><\/p>\n

    QQQ<\/b> Nasdaq <\/span> down 30%<\/span><\/p>\n

    IWF<\/b> Russell Growth<\/span> down 30%.<\/span><\/p>\n

    For the year ahead, ValuEngine\u2019s predictive model substantially flips this order on its head.\u00a0 <\/span>IWM, IWF <\/b>and <\/span>QQQ<\/b> all receive numerical ratings of <\/span>4 <\/b>(Buy).\u00a0 <\/span>SPY<\/b> receives its normal rating of <\/span>3 <\/b>(Hold) and <\/span>IWD <\/b>and <\/span>MDY <\/b>are rated <\/span>2 <\/b>(Sell). The last two, in particular, surprised your author.\u00a0 Most strategists still predict value and midcap to outperform.\u00a0 Part of the reason could be mean reversion, one of many factors in the model.\u00a0 It may consider these two ETFs somewhat overbought. Another factor in my surprise is that both <\/span>IWD <\/b>and <\/span>MDY <\/b>still have very attractive traditional valuation ratios.\u00a0 Our valuation model even disagrees with that. Surprisingly, a higher percentage of growth stocks are categorized as undervalued than value stocks, a phenomenon I\u2019ve seen very rarely. <\/span>\u00a0MDY, <\/b>less surprisingly, is in the middle of the pack for valuation.\u00a0\u00a0<\/span><\/p>\n

    Of the three buy recommendations, <\/span>IWF (<\/b>Growth)<\/span> and <\/span>IWM <\/b>(Small Cap) seem the most compelling.\u00a0 <\/span>IWF <\/b>has the highest forecast returns of all the ETFs in the sample. <\/span>IWM<\/b> easily contains the highest percentage of undervalued stocks.\u00a0\u00a0<\/span><\/p>\n

    Since we observed return differentiation among the benchmark indexes and prior columns observed distinct differentiation between winning and losing industry sectors in the market, we quickly look at the returns of the 11 Select Sector SPDR ETFs:<\/span><\/p>\n

    \u00a0<\/span><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
    <\/td>\n<\/td>\n2022<\/b><\/td>\nVE<\/b><\/td>\n% Under-<\/b><\/td>\n<\/tr>\n
    Sector<\/b><\/td>\nTickers<\/b><\/td>\nPR Returns<\/b><\/td>\nDividend Yield<\/b><\/td>\nRating<\/b><\/td>\nValued<\/b><\/td>\n<\/tr>\n
    Energy<\/span><\/td>\nXLE<\/span><\/td>\n64.29%<\/span><\/td>\n2.9%<\/span><\/td>\n2<\/span><\/td>\n32%<\/span><\/td>\n<\/tr>\n
    Utilities<\/span><\/td>\nXLU<\/span><\/td>\n1.47%<\/span><\/td>\n2.9%<\/span><\/td>\n5<\/b><\/td>\n10%<\/span><\/td>\n<\/tr>\n
    Consumer Staples<\/span><\/td>\nXLP<\/span><\/td>\n-0.80%<\/span><\/td>\n2.4%<\/span><\/td>\n4<\/b><\/td>\n9%<\/span><\/td>\n<\/tr>\n
    Health Care<\/span><\/td>\nXLV<\/span><\/td>\n-2.04%<\/span><\/td>\n1.5%<\/span><\/td>\n4<\/b><\/td>\n23%<\/span><\/td>\n<\/tr>\n
    Industrial<\/span><\/td>\nXLI<\/span><\/td>\n-5.55%<\/span><\/td>\n1.5%<\/span><\/td>\n3<\/span><\/td>\n14%<\/span><\/td>\n<\/tr>\n
    Financial<\/span><\/td>\nXLF<\/span><\/td>\n-10.56%<\/span><\/td>\n1.9%<\/span><\/td>\n2<\/span><\/td>\n0%<\/span><\/td>\n<\/tr>\n
    Materials<\/span><\/td>\nXLB<\/span><\/td>\n-12.32%<\/span><\/td>\n2.0%<\/span><\/td>\n2<\/span><\/td>\n7%<\/span><\/td>\n<\/tr>\n
    Real Estate (REIT)<\/span><\/td>\nXLRE<\/span><\/td>\n-26.21%<\/span><\/td>\n3.0%<\/b><\/td>\n1<\/span><\/td>\n53%<\/span><\/td>\n<\/tr>\n
    Technology<\/span><\/td>\nXLK<\/span><\/td>\n-27.71%<\/span><\/td>\n1.0%<\/span><\/td>\n3<\/span><\/td>\n37%<\/span><\/td>\n<\/tr>\n
    Consumer Discretionary<\/span><\/td>\nXLY<\/span><\/td>\n-36.25%<\/span><\/td>\n0.9%<\/span><\/td>\n3<\/span><\/td>\n21%<\/span><\/td>\n<\/tr>\n
    Communication Services<\/span><\/td>\nXLC<\/span><\/td>\n-37.64%<\/span><\/td>\n1.3%<\/span><\/td>\n1<\/span><\/td>\n58%<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n
    All 5,000 stocks, 16 sector groups, 140 industries, and 500 ETFs have been updated.<\/b><\/h5>\n
    Two week free trial:\u00a0<\/b>www.ValuEngine.com<\/b><\/a>\u00a0\u00a0<\/b><\/h5>\n

    The utter dominance of the energy sector in 2022 is legendary.\u00a0 <\/span>XLE, <\/b>representing the Energy Select Sector SPDR, has a 60+% gain.\u00a0 Among the other 10 ETFs, only the Utilities SPDR, <\/span>XLU<\/b>, managed to eke out a superior return.\u00a0 The top six sectors outperformed the S&P 500 in 2022 while the bottom five all underperformed the bellwether.\u00a0<\/span><\/p>\n

    Looking forward, our predictive model spans the range of possible ratings from 5 (Strong Buy) to 1-rated (Strong Sell).\u00a0 <\/span>XLU<\/b>, representing Utilities, is the lone <\/span>5<\/b>-rated Sector ETF while two ETFs, <\/span>XLRE<\/b>, Real Estate, and <\/span>XLC<\/b>, Communications, are rated as Strong Sells.\u00a0 Altogether, the second-, third-, and fourth-best performing Sector ETFs in 2022 are rated as buy candidates for 2023.\u00a0 In addition to top-tier-rated <\/span>XLU<\/b>, Consumer Staples (<\/span>XLP<\/b>) and Health Care (<\/span>XLV<\/b>) receive recommendations of <\/span>4 <\/b>(Buy).\u00a0\u00a0<\/span><\/p>\n

    For those more interested in analyzing stocks than ETFs, ValuEngine\u2019s top-ranked US-domiciled large cap stock in each of the highest ranked sectors are as follows:<\/span><\/p>\n

    Utilities: <\/span>Entergy (ETR)<\/b> with a rating of <\/span>4<\/b> (Buy) and a dividend yield of 4.0%.\u00a0<\/span><\/p>\n

    Consumer Staples: <\/span>Archer-Daniels (ADM), <\/b>rated <\/span>4<\/b> and a dividend yield of 1.9%.<\/span><\/p>\n

    Health Care: <\/span>Cardinal Health<\/b> (CAH) <\/b>rated <\/span>4<\/b> and a dividend yield of 2.6%.<\/span><\/p>\n

    As usual, ValuEngine ratings are intended solely for informational purposes to be used in conjunction with other source materials.<\/span><\/p>\n

    Financial Advisory Services based on ValuEngine research available: \u00a0\u00a0<\/b>www.ValuEngineCapital.com<\/b><\/a><\/h5>\n

    Overall, our models see this year\u2019s stock market as having potential for opportunity, but in the aggregate looks for flat-to-slightly positive price returns.\u00a0 One somewhat likely scenario is that we will continue to see sector, style and cap-size regimes take periodic turns in assuming leadership, then falling out of favor.\u00a0 During tumultuous times, owning low-volatility sector ETFs can mitigate losses. The three recommended sector ETFs have annualized volatilities of between 15% and 16.5%, far lower than the 19% of the S&P 500 or the 39% annualized volatility of the energy sector.\u00a0 At the other extreme, staying out of the market altogether during inflationary times means locking in certain annualized losses in purchasing power.\u00a0 In the middle, <\/span>XLU<\/b>, <\/span>XLP and XLV <\/b>are all ETFs that are timely now and should hold up relatively well during steep declines.\u00a0\u00a0\u00a0<\/span><\/p>\n

    By Herbert Blank<\/b><\/h5>\n
    Senior Quantitative Analyst, ValuEngine Inc<\/b><\/h5>\n
    www.ValuEngine.com<\/b><\/a><\/h5>\n
    support@ValuEngine.com<\/b><\/h5>\n
    All of the approximately 5,000 stocks, 16 sector groups, 140 industries, and 600 ETFs have been updated on\u00a0<\/b>www.ValuEngine.com<\/b><\/a><\/h5>\n
    Financial Advisory Services based on ValuEngine research available through\u00a0<\/b>ValuEngine Capital Management, LLC<\/b><\/a><\/h5>\n
    Free Two Week Trial to all 5,000 plus equities covered by ValuEngine\u00a0<\/b>HERE<\/b><\/a><\/h5>\n

    Subscribers log in\u00a0<\/b>HERE<\/b><\/a><\/p>\n

     <\/p>\n","protected":false},"excerpt":{"rendered":"

    In general, the 2022 US Stock Market was a conflagration that wiped out almost everything in its path with the exception of a few industries and ETFs.\u00a0 The ETF reports on ValuEngine for ETFs that follow market benchmarks provide a side benefit in writing market analyses.\u00a0 They are a window to implicit forecasts for 3-, … Read more<\/a><\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[130,1,39],"tags":[1338,1576,2129,1761,1719,996,1753,1731,1845,1928,1834,1833,1617,1938,1726,1712,28,1656,1659,63],"_links":{"self":[{"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/posts\/3014"}],"collection":[{"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/comments?post=3014"}],"version-history":[{"count":4,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/posts\/3014\/revisions"}],"predecessor-version":[{"id":3018,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/posts\/3014\/revisions\/3018"}],"wp:attachment":[{"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/media?parent=3014"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/categories?post=3014"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/tags?post=3014"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}