The following is an excerpt from Zacks Chief Strategist John Blank’s full Mar Market Strategy report To access the full PDF, click here.

To introduce this March strategy report, let’s review YTD 2023 returns.

On March 3rd:

• The DJIA was down -0.43% YTD
• S&P500 was up +3.69% YTD
• The Nasdaq was up +9.52% YTD

I. What fundamentals are U.S. stock markets pricing in?

Five beaten-down 2022 sectors show outperforming returns in YTD 2023:

• Consumer Discretionary $XLY: +12.4% (on Feb 28th)
• Communication Services $XLC: +8.9%
• Info Tech $XLK: +9.6%
• Materials $XLB: +5.2%
• Financials $XLF: +4.1%

2 S&P500 (SPDR) sector offer a subpar YTD positive return:

• Real Estate $XLRE: +3.2%
• Industrials $XLI: +2.5%

4 defensive sector returns are YTD negative:

• Consumer Staples $XLP: -3.5%
• Energy $XLE: -5.1%
• Health Care $XLV: -6.6%
• Utilities $XLU: -8.3%

YTD returns data (above) are largely consistent — with S&P500 sector strengths — showing up in the February 28th, 2023 Zacks Industry Ranks.

Zacks rankings show Consumer Staples leads.

Consumer Discretionary is now Very Attractive.

So much for the weak consumer!

The U.S. consumer is spending. Jobs are plentiful.

Next in line?

The Health Care sector got a big upgrade.

It joins Industrials as a Very Attractive sector, after the two consumer groups.

Utilities, Materials, and the Energy sector are grouped at Market Weight.

Ditto Financials at Market Weight.

Info Tech rose to a Market Weight this month. Software and Services and Electronics are strong here.

Communication Services is at the back. But it is only Unattractive.

I show industry details — and three top-down stock picks! — from the S&P500 large-cap sectors next.

II. Zacks March Sector/Industry/Company Telescope

(1) Consumer Staples stayed Very Attractive. Food, Beverages, and Soaps & Cosmetics, look hot.

Zacks #1 Rank (STRONG BUY): Ahold (ADRNY)

(2) Industrials stayed Very Attractive. Pollution Control, Metal Fabricating, Machinery, and Industrial Products-Services are hot.

Zacks #1 Rank (STRONG BUY): WW Grainger (GWW)

(3) Consumer Discretionary rose to Very Attractive from Market Weight. Consumer Electronics, Apparel, and Publishing are the best.

Zacks #1 Rank (STRONG BUY): LVMH Moet Hennessy Louis Vuitton (LVMUY Quick QuoteLVMUY - Free Report)

(4) Health Care rose to Very Attractive from Market Weight. Medical Care and Medical Products lead the way.

(5) Utilities fell to Market Weight from Very Attractive. Utilities-Telephone and Utilities Gas Distribution look best.

(6) Materials fell to Market Weight from Attractive. Steel looks best.

(7) Energy stayed Market Weight. Oil Misc. and the Drillers look best.

(8) Financials stayed Market Weight. Major Banks stay at the top.

(9) Communications Services fell to Unattractive from Market Weight.

(10) Info Tech rose to Market Weight from Unattractive. Comp-Software Services and Electronics are tops here.

III. Conclusion

U.S. recession worry has not appeared relevant to U.S. consumers.

At all!

High retail staples prices are another story.

The macro data?

That has the full attention of the FOMC.

How this idiosyncratic post-COVID business cycle plays out is anybody’s informed guess.

No more than that.

For my part, don’t lose sleep — until the U.S. Federal nonfarm payroll reports roll over — on a revised basis.

The unrevised U.S. nonfarm payroll data for February 2023 arrives Friday, March 10th.

For now, stocks are pricing in a strong-spending U.S. consumer.

Stocks also bounce now, on a post-COVID 2024 realignment, inside info tech groups.

Enjoy the rest of the Zacks March 2023 strategy report.

Warm Regards,

John Blank
Zacks Chief Equity Strategist and Economist