ETF Insights| November 1, 2024 | Communications Services Sector
Communication Services Sector November Outlook—Big Interactive Media Stocks are Taking Off Again
Price Action & Performance
The Communications Services Sector, proxied here by XLC, broke out in November to all-time highs on price and made a 52-wk relative-high vs. the S&P 500 as well. Both are clear bullish signals in the context of technical analysis. The Oscillator work is showing a buy signal on the MACD study while the RSI near-term momentum gage is short of overbought conditions. From a Technical perspective, this is the best price action among the 11 sector funds in our Elev8 Portfolio universe.
At the industry level, legacy telecom outperformance has faded, while Wireless, Entertainment and Interactive Media Industries outperformed in October. On the downside, Media has continued to be a laggard but has improved slightly over the past 3-months on performance.
At the stocks level, META, GOOG/L and NFLX continue to be favored exposures, but they have been joined by T, TMUS, FOX.A, and NEWS.A which has helped push the sector to new relative highs. META and GOOG both recently posted strong quarters.
Economic and Policy Drivers
Election years typically spike media buying, but soft eco data was a cross current against that trend this year. As we noted in the previous section, T and VZ have become attractive as high dividend but now that dovish policy is on the table, investors are starting to fade summer gains.
META and GOOG/L are both facing anti-trust probes with GOOG facing ad DoJ lawsuit and META dealing with one from the FCC as well as from Germany’s cartel regulation agency. Privacy concerns aren’t on the front-burner at present, but any increased regulation there could crimp opportunities for the Sector.
In Conclusion
We like the technical setup for XLC heading into November and it is our largest position in the Elev8 model as we enter the new month. The Elev8 Sector Rotation Model recommends an OVERWEIGHT position in XLC of +4.53% vs. the benchmark S&P 500 for November 2024.
Chart | XLC Technicals
- XLC 12-month, daily price (200-day m.a. | Relative to SPX | MACD | RSI )
- XLC has broken out to new price and relative highs. This is typically a very bullish development
XLC Relative Performance | XLC Industry Relative Performance | 3-Months
Data sourced from FactSet Research Systems Inc.
