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The Center Is Marco Polo: Zacks October Strategy

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

 

I. Europe is surely churning

In a profound geopolitical way. Don’t understate this.

Here is what you should know, in terms of current events:

(A) French President Emmanuel Macron and Joe Biden will meet in Rome, Italy at the end of October.

Reconciliation at the Group of 20 summit on Oct. 30-31 would follow a Biden-Macron phone call last month and potentially end a transatlantic row.

This meeting was triggered last month by the United States' negotiation in secret of a military pact, known as AUKUS, with Australia and Britain to counter China, excluding France.

(B) Germany is in discussions for a new coalition government.

One of the leading prospects is of a “traffic-light” coalition of the center-left SPD (Social Democratic Party), the Greens, and the center-right FDP (Free Democratic Party).

(C) Italian Prime Minister Mario Draghi has emerged stronger from the country’s local elections.

The weekend Italian local elections held on October 2-3 showed us.

Center-left candidates reaped big wins in the large cities of Milan, Naples and Bologna on Sunday and Monday.

In sum, the latest European political events (and European political movers and shakers) look to be taking Europe towards the center-left.

Following the outlines of the center-left Biden win in 2020.

II. Who is most likely to lead a global dialogue for Europe?

I would put my money on Italy’s Mario Draghi.

Macron and the German elections have been in the news, much more.

This is distracting.

Mr. Draghi is a seasoned and formidable force, both inside Italy and across the region.

Seriously contemplate Mr. Draghi’s oft-overlooked academic vita…

From 1975 to 1981, Mario Draghi was first:

  • - Professor of Economic and Financial Policy at the University of Trento, then
  • - Of Macroeconomics at the University of Padua, and later
  • - Of Mathematical Economics at the University of Venice


In 1981, he was appointed Professor of Economic and Monetary Policy at the University of Florence. A position he held until 1994.

My PhD thesis advisor, the late German macroeconomist Rudiger Dornbusch, was close friends with him.

They spoke and met often, during the early 1990s, while Mario Draghi was teaching at the University of Florence.

I think Mr. Draghi’s astonishingly rich academic background gets overlooked.

He is mainly known as the former head of the European Central Bank (the ECB).

Mr. Draghi is no bureaucrat.

The man is a formidable intellect, in the deepest of the many Italian Renaissance traditions, and many other Italian traditions that run still deeper; like the Roman Empire; and the global influence of the intrepid 12th century Venetian merchant Marco Polo.

III. Take a look – into how Marco Polo’s home city is evolving

Ca' Foscari University of Venice is a public university in Venice, Italy.

Since its foundation in 1868, it has been housed in the Venetian Gothic palace of Ca' Foscari, from which it takes its name.

The palace stands on Venice’s famed Grand Canal. If you have toured Venice, you have seen the facade of this university.

  • - Ca’ Foscari became a full-fledged university in 1968. It currently has eight departments and almost 21,000 students.
  • - It is one of the highest ranked universities in Italy, ranking 5th in 2017 out of 89 Italian universities.
  • - The school was — and today the University is — the first and most prestigious institute of higher education in commerce in Italy.

???From the outset, it was also conceived as a national and international institution rather than a regional one.

Click the hotlink I provide to explore Ca' Foscari’s THE MARCO POLO CENTER

This Ca' Foscari’s center for “Global Europe-Asia Connections.”

That geopolitical subject is at the heart of what French President Macron, the other leaders of the G20 who are European, and President Biden will address at the end of October.

In short, these are transformative times for Europe.

Deep roots in time will begin to inform us.

China’s “Belt and Road” initiative is China’s open reuse of Marco Polo’s Travels.

But the problem is: Marco Polo was a Venetian merchant, explorer, and writer.

Polo was not Chinese.

Marco Polo’s experience will likely inform Europe more than China!

IV. The Venetian university just set up an “Institute for Global Challenges”

I would bet mightily. The fingerprints of Mario Draghi are all over this new set of six global institutes, in some way, shape or fashion.

Further, this is likely where one can source a set of Center-Left ideas for Europe.

If Draghi is indeed as influential as I believe he will be.

According to the Ca' Foscari website—

The Institute for Global Challenges (IGC) is a transdisciplinary center where thematic groups develop advanced research to face current and future global challenges.

The IGC has been established in May 2020 following the successful experience of the Research for Global Challenges initiative, which since 2015 has been bringing together transversal research groups and a number of international research partner and networking opportunities.

The center supports through six Research Institutes the design of innovative and collaborative research projects for international funding application and related initiatives that promote the cross-fertilization among researchers from different backgrounds.

Research Institute for Complexity
Research Institute for Digital and Cultural Heritage
Research Institute for Social Innovation
Research Institute for International Studies
Research Institute for Green and Blue Growth
Research Institute for Innovation Management

V. Zacks October Sector/Industry/Company Telescope

A full fall Zacks Rank system showed 6 strong sectors; similar to 6 elevated in July.

But Info Tech, Industrials, and Financials were true top sectors; strong in more industries.

Materials fell precipitously to Very Unattractive from Attractive. Only the Paper industry escaped a major Zacks Industry Rank downgrade.

Two value sectors: Energy and Financials stayed at Attractive. Oil E&P, and big Integrated groups remain strong, with $72 a barrel WTI oil prices and $80 Brent. Rates rising helps Banks. Lower unemployment rates help insurers.

Consumer Discretionary rose to Attractive in October. Autos-Tires-Trucks and Consumer Electronics show where demand and supply bottlenecks meet. Consumer Staples stayed at Market Weight too, with Agri-business booming with commodity prices.

Health Care rose to Attractive. Medical Care led again. The typical defensives, Telcos and Utilities, stayed at Market Weight.

(1) Info Tech stayed at Very Attractive. Telco Equipment, Semis (with a global supply shortage), and Electronics all of those look excellent. Again.

Top Zacks #1 Rank (STRONG BUY): Applied Materials (AMAT - Free Report)

(2) Industrials stayed at Very Attractive. Machinery-Electrical, Metal Fabricating, Machinery, and Railroads were the top industries. Again.

Top Zacks #1 Rank (STRONG BUY): Alcoa (AA - Free Report)

(3) Financials moved to Very Attractive from Attractive. Insurance, Investment Banking, and Real Estate looks good. Lower loss reserves, trading profit from stocks and M&A deals help.

Top Zacks #1 Rank (STRONG BUY): BRT Apartments Corp. (BRT - Free Report)

(4) Energy
stayed at Attractive. Oil E&P and Integrated looked great. Again.

(5) Consumer Discretionary rose to Attractive from Market Weight.  Autos/Tires/Trucks and Consumer Electronics were strong and also show wealth effects from COVID remain in play.

(6) Health Care rose to Attractive from Market Weight. Medical Care looked best. Drugs too.

(7) Consumer Staples stayed at Market Weight. Agri-business (commodity price boom) and Food/Drug Retail looked best. Once again.

(8) Communications Services stayed at Market Weight. Telco Equipment looked best. Again.

(9) Utilities stayed at Market Weight. Utilities-Water Supply was the best.

(10) Materials fell precipitously to Very Unattractive from Attractive. Only Paper looked good.

VI. Conclusion

As far as I am concerned, it is a pity.

Vast swaths of the population inside the USA — at a time of profound global shifting of political and economic forces — do not seem up to the task.

Of mastering a new and complex global world.

A world with obvious deep historic roots.

An absence of humility inside the USA, which is first needed, does not allow for foundational relearning, to build a sweeping, needed, change in perspective.

From the USA perspective, one drawn up by this U.S. economist, this is a domestic population that is not stepping up to embrace a global view.

It is doing the opposite.

After being the only global superpower to emerge out of the 50-year-long Cold War, this internal insularity will be a mystery, one for the historians to consider.

Perhaps it will be Europe that can provide the needed assist.

Enjoy the rest of Zacks OCT 2021 Market Strategy report.

John Blank


In-Depth Zacks Research for the Tickers Above


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Alcoa (AA) - free report >>

Applied Materials, Inc. (AMAT) - free report >>

BRT Apartments Corp. (BRT) - free report >>