RBC's Investment Strategy Playbook

In a new report, RBC Capital Markets analyst Jonathan Golub discusses the firm’s stock market investment playbook for the month of September. Golub outlines RBC’s long-term and short-term views of the stock market and includes which sectors traders should be buying on market weakness and which sectors they should avoid.

Long-term strength
While recent market weakness has led to growing fears that the six-year bull market in U.S. equities may be reaching its end, RBC believes that the S&P 500 still has room to the upside. In the past , the firm has argued that the weaker economic recovery/expansion would produce a longer overall business cycle, and Golub believes that that thesis has been playing out perfectly in recent years.
 

According to the report, global growth expectations for this cycle were unrealistically high, and companies will continue to focus on margin expansion and capital return. U.S. stock investors shouldn’t expect large gains throughout the remainder of this cycle, but RBC does not believe that the market will be crashing anytime soon.

Short-term weakness
Despite the bullish long-term outlook, RBC believes there could be more pressure on stock prices in the short-term. It’s no surprise that China is the center of RBC’s concerns. “Imbalances have come into greater focus, accompanied by weaker commodity prices, global PMIs, and trade data,” Golub explains.

How to play it
Based on RBC’s outlook, secular growth stocks, rather than cyclical stocks, are the best place for traders to have their money for now. RBC prefers sectors such as Consumer Staples and Health Care to Industrials and Materials.