Daily Spotlight: Argus’s Favored Classes, Segments

Arista Networks, Inc. (ANET) Stock Forecasts

AllMarket Outlook

ArgusoSeptember 08, 2023

Market Outlook

Neutral – Short term


August was a difficult month for investors, as both major asset classes declined by about 1.5%. Year-to-date, stocks still hold the performance lead over bonds, with a 17% gain in the benchmark S&P 500 compared to a 1% decline for fixed income. Looking ahead, our Stock-Bond Barometer model modestly favors bonds over stocks for long-term portfolios. In other words, these asset classes should be near their target weights in diversified portfolios, with a slight tilt toward fixed income, given the rise in yields since early 2022. We are now overweight on large-caps. We favor large-caps for growth exposure and financial strength, while small-caps offer value. Our recommended exposure to small- and mid-caps is 12%-13% of equity allocation, below the benchmark weighting. U.S. stocks have outperformed global stocks over the trailing five-year period. We expect the long-term trend favoring U.S. stocks to continue, given volatile and erratic global economic, political, geopolitical, and currency conditions. That said, international stocks offer favorable near-term valuations, and we target 5%-10% of equity exposure to the group. In terms of growth and value, growth has rebounded in 2023, outperforming value as interest rates have stabilized. Over the longer term, we anticipate that growth, led by the Technology and Healthcare sectors, will top returns from value, led by the Energy and Basic Materials sectors, due to favorable secular, demographic and regulatory trends.

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