Where Are The Market Leaders?

09/04/2013 12:00 pm EST

Focus: STRATEGIES

Jim Jubak

Founder and Editor, JubakPicks.com

One concern of MoneyShow's Jim Jubak, as we head into the end of the year, is what sector will lead the market higher, as the traditional fall leaders are not showing great earnings.

One of the problems I see for the US Stock Market, as we go toward the end of the year is a lack of leadership. Let's say we get through September and October without a whole lot of damage, and we somehow have not sent the US Government into default, and we've got a budget, and the fed taper has proven to be not terribly significant, and so we're looking at mid-October, what's going to drive this market upward?

Usually when you get a rally, a resumed rally, or a rally that's kind of got any kind sustained power, you need some kind of leadership. Typically leadership might come from financials, well, not this time, because while the taper may be started or put off until October, you've still got worries about rising interest rates.

The US economy is doing okay, but it's hard to see manufacturing leading the market up. Commodities don't look like they're going to do it, because you've got still growth problems in the developing economies of the world, so really, what does that leave?

Well, it leaves technology, and that's not really a good thing, because technology earnings don't look all that exciting, even though this, the third and the fourth quarter, are usually the seasonal times for technology to out-perform. But if you look at it and you look at the old technology bellwethers like Microsoft, Intel, Cisco, you don't see year over year big surges in earnings growth because there are problems in the PC market, in the internet networking equipment market, that are really depressing earnings, so it transitions at all these companies, so you're not going to see a boost there.

The new guys, which are sort of Google, probably not a big enough surge to drive the sector, and that leaves you then with, sort of, the phone companies like Apple and the device market, so Apple, Qualcomm, again, not clear that there's enough of a trend here to drive the whole sector up, to drive the market with it, so in terms of earnings numbers, in terms of projections, in fact, Apple, to take one example, looks like it's going to see a negative year over year earnings growth rate, which means, I guess, an earnings decline in the September quarter and barely a decline, but still a decline, in the December quarter.

What you're looking at here is not numbers driven. The question is whether there is some excitement, because one of the real worries about the technology sector is, give me a product that anybody feels enthusiastic about buying, the consumers are going to flock to, and one of the real problems in this sector has been that a sense that wireless phone technology, wireless phone products, tablets, etc., are all sort of at the end of a cycle, that Apple's innovation consists of putting a graphite colored cover on an iPhone as opposed to a black cover, and if that's all innovation is, no excitement, no earnings, then I think we're going to have trouble moving the US Stock Market up, in much more than a bounce, after September and October.

This is Jim Jubak for the Moneyshow.com Video Network.

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