Page 3 - ISQ UK JANUARY 2020

JANUARY 2020

“ We always encourage investors to keep their eyes on the
prize and follow a well-thought out financial plan ... . ”

#5: See the Bigger Picture for US Equities

Following the best year for US equities since 2013, investors Communication Services, Financials, and Industrials. Our lone
need to see the bigger picture. The macroeconomic backdrop defensive choice is Health Care, which lagged the broader
remains supportive with muted risk of a recession, easing market in 2019 due to political risk. This sector selection has us
financial conditions, and lower interest rates. 2019 performance seeing double, as a bias towards these sectors is inherently
was largely driven by P/E expansion, but 2020 should renew the beneficial to small-cap stocks. From both a market capitalisation
emphasis on earnings growth, which we forecast at 5%-6%. and revenue perspective, small cap carries its highest exposures
History will play a role too, as election years have been and weightings towards these same sectors.
historically positive for the equity market. Since 1936, in
presidential election years, the S&P 500 has rallied 9% on #7: Near & Far Sights for Technology Sector
average and was positive 86% of the time. In the case of no
recession (our forecast), the trend is more impressive with an We envision the technology sector being a stand out again this
average return of 10.7% and positive 94% of the time. Our base year. Our near sights are focused on earnings visibility, which
case is that the S&P 500 will notch new highs and rally to ~3,350 remains strong with the anticipated rollout of 5G. The transition
by year end. from 4G to 5G is the largest enhancement in wireless technology
in a decade, so our far sights believe this will be a multi-year
#6: Double Vision of Favourite Sectors catalyst for everything from semiconductors to phone carriers.
The benefits should permeate across other industries, keeping
We still favour cyclicals over defensives, with four of our five demand for new technologies, applications, services, and
favourite sectors being Information Technology, software resilient.

Investment Strategy Committee Members

Lawrence V. Adam, III, CFA, CIMA®, CFP® – Committee President, Nicholas Lacy, CFA Chief Portfolio Strategist, Asset Management Services
Chief Investment Officer, Private Client Group
Joey Madere, CFA Senior Portfolio Analyst, Equity Portfolio & Technical
Chris Bailey European Strategist, Raymond James Investment Services Strategy
Ltd.
Ed Mills Managing Director, Washington Policy Analyst, Equity Research
Scott J. Brown, PhD Chief Economist, Raymond James
Pavel Molchanov Director, Energy Analyst, Equity Research
James C. Camp, CFA Managing Director, Strategic Income,
Eagle Asset Management* Chief Investment Office
Doug Drabik Managing Director, Fixed Income Research Anne B. Platt, AWMA®, AIF®, RICP® – Committee Chair, Vice President,
Investment Strategy & Product Positioning, Investment Strategy
J. Michael Gibbs Managing Director, Equity Portfolio & Technical Strategy
Giampiero Fuentes Investment Strategy Analyst, Investment Strategy
Kevin Giddis Chief Fixed Income Strategist, Investment Strategy
Taylor Krystkowiak Investment Strategy Analyst, Investment Strategy
Nick Goetze Managing Director, Fixed Income Services

2