We have reviewed our recommended sector allocations this month and have adjusted our sector recommendations for the second quarter of 2025. Our multi-factor model includes a performance ranking system, which assigns points for monthly, quarterly, and YTD sector performance vs. the benchmark S&P 500; current sector P/E vs. 5-year P/E, with points awarded for discount to S&P 500 current vs. 5-year P/E delta; two-year earnings growth, with points awarded for exceeding benchmark average and for EPS acceleration; relative performance to the sector group average; sector conviction, meaning BUY rating percentage per sector vs. total Argus BUY rating percentage; and PEG ratio, with points awarded or subtracted based on sector PEG ratios below or above the group average. Our process led to an upgrade of Consumer Staples to Over-Weight from Under-Weight. As well, we lowered Communication Services to Market-Weight from Over-Weight, and we lowered Consumer Discretionary to Under-Weight from Market-Weight. Our rebalancing process takes place four times a year, early in the months of March, June, September, and December. Our current Over-Weight sectors are Healthcare, Consumer Staples, Financial, Utilities, and Information Technology. Our current Market-Weight sectors are Communication Services, Energy, Industrial, and Real Estate. Our Under-Weight sectors are Consumer Discretionary and Materials. Argus Research suggests that advisors and investors leverage this consistent and comprehensive process to adjust sector weightings within their diversified equity portfolios, with a primary focus on the largest sectors.

Argus has published its latest Portfolio Selector, which features its popular Focus List. Each month, Director of Research Jim Kelleher, CFA, surveys the team of Argus Research industry analysts for their timeliest recommendations out of the company's fundamental universe of approximately 500 stocks. The Focus List typically includes 30 stocks: turnover is high, as Jim typically adds three or four new stocks per month. Below are the latest additions, all of which are rated BUY at Argus.

The S&P 500 (SPX) hit an intraday low of 5,505 on Thursday, right at the key 61.8% retracement of the rally from last August until the recent all-time closing high in February. The index rose 2.1% on Friday, with the Nasdaq popping 2.6% and the Nasdaq 100 (QQQ) 2.5%. On the upside for the SPX, a 38.2% retracement of the decline is at 5,750; a 50% take-back comes in at 5,825; and the key 61.8% retracement lies at 5,900. Initial chart resistance comes in at 5,930, while the slowly declining 50-day average is at 5,940. A short-term SPX buy signal was tripped on Wednesday. The VIX closed outside its upper daily Bollinger Band on Monday, fell inside the upper band on Tuesday, and closed lower Wednesday. This three-day sequence gave us a VIX sell signal and the S&P 500 buy signal. We also have seen numerous bullish breadth divergences, but long-term breadth remains a concern. The SPX completed a double top on the weekly chart, which is not common, and a measured move based on the size of the pattern initially targets 5,500 and then 5,400. The index is below the 13-, 26-, and 40-week moving averages for the first time since October 2023 -- which can lead to much deeper downside moves. But to confirm longer-term damage, we need the 13-week to break both the 26- and 40-week and need the 26-week to cross below the 40-week average. The SPX also has (very quickly) broken below its lower weekly Bollinger Band for the first time since October 2023. That sets up the potential for a fairly reliable buy signal if the index can reclaim the lower band. (Mark Arbeter, CMT)

The S&P 500 (SPX) hit an intraday low of 5,505 on Thursday, right at the key 61.8% retracement of the rally from last August until the recent all-time closing high in February. The index rose 2.1% on Friday, with the Nasdaq popping 2.6% and the Nasdaq 100 (QQQ) 2.5%. On the upside for the SPX, a 38.2% retracement of the decline is at 5,750; a 50% take-back comes in at 5,825; and the key 61.8% retracement lies at 5,900. Initial chart resistance comes in at 5,930, while the slowly declining 50-day average is at 5,940. A short-term SPX buy signal was tripped on Wednesday. The VIX closed outside its upper daily Bollinger Band on Monday, fell inside the upper band on Tuesday, and closed lower Wednesday. This three-day sequence gave us a VIX sell signal and the S&P 500 buy signal. We also have seen numerous bullish breadth divergences, but long-term breadth remains a concern. The SPX completed a double top on the weekly chart, which is not common, and a measured move based on the size of the pattern initially targets 5,500 and then 5,400. The index is below the 13-, 26-, and 40-week moving averages for the first time since October 2023 -- which can lead to much deeper downside moves. But to confirm longer-term damage, we need the 13-week to break both the 26- and 40-week and need the 26-week to cross below the 40-week average. The SPX also has (very quickly) broken below its lower weekly Bollinger Band for the first time since October 2023. That sets up the potential for a fairly reliable buy signal if the index can reclaim the lower band. (Mark Arbeter, CMT)