Thread by @InvestiBrew

It's the better cousin this time

Talking about the services PMI index, after we broke down the manufacturing PMI and which industries we want to go long

It's time to get your attention away from $XLI and into $XLY $XRT $XLF

And we'll tell you why

A 🧵☕️

1. Starting with the index itself

The manufacturing PMI has contracted for over 24-months now

Which means

Any and all GDP growth for these 2 years is coming from two sources only:

1. Inflation
2. Services PMI

Seeing how important the index is now for the economy, another expansionary reading would have us looking for long ideas within it 👀

2. What's actually driving this index higher though?

It boils down to three segments:

- Business Activity
- New Orders
- Prices and employment

So, knowing that all three read expansion for the month and quarter, we want to focus our attention on the industries that share the same trend ✅

3. So, let's break down the industries that had the most for each

Business activity:
Finance & Insurance
Retail Trade
Transportation & Warehousing

New Orders:
Finance & Insurance
Transportation & Warehousing
Retail Trade

Prices:
Retail Trade
Finance & Insurance
Transportation & Warehousing

Looks like the trend is headed for these three 🫰

4. As the index has been expanding for a while

We want to do the opposite of our manufacturing $XLI sector strategy, which is finding potential turnarounds from negative EPS growth into positive

Here the situation actually calls for finding good EPS growth to be followed by even better EPS growth

And that's where the stock selection process comes in

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