The blistering hot theme in markets right now is obviously the China trade, and this means investor capital is being allocated towards the Hang Seng, China ADRs, and for institutions that have access, the Onshore A-Shares market. As for other rotational activity shared as opportunities, UnitedHealth Group Inc. (UNH) just saw a nice 2% bump, notes Larry Cheung, founder of Letters from Larry.
US markets have a heavy allocation/index weighting towards Big Tech, and because this basket of stocks is at DCF Base Case (or higher), we need earnings season to power through to the upside. I suspect that any weakness in FAAMG in October will be used as a window of opportunity to enter positioning ahead of earnings season.
In order for the November/December rally to work based on “positive seasonality,” we need to have Big Tech release strong results. Seasonality won’t “work” if earnings season doesn’t deliver. Any October weakness for FAAMG improves the risk/reward into earnings.
UnitedHealth Group Inc. (UNH)
Meanwhile, UNH saw a nice 2% bump and Eli Lilly and Co. (LLY) is also exhibiting relative strength compared to the index. I will continue to find more ideas. But remember that there is never any rush.
If your outlook is that the broad market is likely to remain choppy or have a modestly falling bias, then scalp these opportunities and just take the 2%-4% moves. In isolation, these moves might not seem like a lot, but when done in volume across different names, that then becomes very additive.
If your outlook is that the broad market can sustain greater upside, then these stocks are a Hold for Higher.
