History says REITs will be beneficiaries when rates ultimately turn, so we’re doing our homework early. When buying REITs for a falling-rate environment, are you buying a monolith—or do the underlying sectors behave substantially differently in that it matters which ones you own? It matters. Quite a bit.

For decades, we’ve tracked an indicator that maps bond market conditions to equity performance: the Dow Bond Oscillator—and its track record is exceptional. Despite the S&P 500’s perpetual run to new highs in 2026, the DBO has been on a persistent sell signal.

Despite the official consensus that leveraged ETFs are strictly for short-term trading, a recent academic paper by Carpenter, Lu, and Whitelaw argues the opposite. Their study contends these funds can actually serve as a superior long-term wealth strategy for certain retirement savers.

Some sentiment measures reliably correlate (usually contrarily) with forward returns. Others are valuable as regime indicators and gauges of market fragility. The message from leveraged ETF flows is split, with one foot in each camp. Overall, these signals suggest investors may be getting skittish.

The rise in the 10-year nominal rate is almost entirely due to the upswing in real rates—not a jump in inflation expectations. This has put pressure on “real asset classes,” like gold, commodities, real estate, and TIPS. But when real rates retreat, these assets can rebound quickly.

Evidence suggests a favorable post-midterm setting for stocks, particularly with a Republican President/Democratic Congress. 2026 is clearly not a textbook midterm cycle, and long-term bond yields (not the election result), are the key driver of all markets.

Overall, our historical study shows that the onset of a tightening cycle isn’t too concerning. Yet, the more aggressive the hikes and the longer the hiking period, the more likely monetary policy becomes too tight.

Read this week's Major Trend. 

Read this week's Major Trend. 

Read this week's Major Trend. 

Read this week's Major Trend. 

Core Strategy gained 2.87% in August, beating the S&P 500 with net equity exposure under 60% (9.30% YTD). Select Industries jumped 4.11% (19.90% YTD) on Gold Miners and AI-displacement holdings. Grizzly slipped 1.93% in a tough short environment but stayed just 8.13% down YTD.

Read this week's update.

Job growth has gone soft, yet unemployment has barely budged. Fewer jobs, but nobody’s catching the boot. In past years, low job growth would’ve sounded economic alarms. Today, it’s closer to noise. The reason for that change is worth understanding, so we developed a better metric: the Employment Diffusion Index.

Despite a long list of worries, the economy is healthy and the risk of an imminent recession is low. Market-based measures are favorable, and the war-driven confidence shock has largely dissipated.

The latest data proposes that the acute phase of the early 2026 private-credit contagion has been restrained so far, but the stress is still real. While FSK showcases how a credit cycle can be properly managed, the 777 failure is a sobering reminder of the systemic vulnerabilities deeply embedded in this space.

Today’s spiking Courage/Fear Ratio reflects optimism borne of an extended market run and AI mania. Yet, history tells us that the path forward is likely to test the mettle of levered bulls, and a full tilt toward Courage at present may be straddling the line between bravery and foolishness.

Consumer sentiment has hit a recent low, yet cyclical stocks are trading at relative highs. Investors have not yet begun to position for a bearish or recessionary environment.

S&P 500 earnings, excluding Financials and Real Estate, grew 66% year-over-year, a result that wouldn’t be surprising coming out of a deep recession, but is almost incomprehensible in the middle of an economic expansion.

Today’s combo of high equity valuations, high bond yields, and negative correlation is a fragile configuration: It removes the portfolio-level shock absorber while raising the sensitivity of equity valuations to the rate path. PMs should be alert to the correlation regime as they set risk budgets and asset weights.

S&P 500 Q2 estimated bottom-up operating EPS continues to move higher as reporting comes to a close. The current figure of $100 stands at a mind-boggling 23% above the final “pre-reporting” estimate logged at the end of June. The resulting vertical line on our Q2 snail trail seems almost laughable. YOY EPS Growth is now nearing an amazing 50%. This feat is even more impressive given the fact that the look-back comparison was not a severe downturn. In fact, Q2-25 was a strong earnings quarter (+11% YOY).

Read this week's Major Trend. 

Read this week's Major Trend.

Read this week's Major Trend. 

The second quarter of 2026 experienced tremendous returns, ranging from 8% for large value up to 26% for small growth, with the nine style boxes recording an average return of 17%.  The differences in style box returns are of such a scale that they had a meaningful impact on the performance of active portfolios across the styles.

Read this week's MTI.

The KOSPI Index crash from its June all-time high has been as breathtaking as its meteoric upsurge beginning in 2025. Korean retail investors are the biggest contributors and victims of the volatility. In fact, they have a long history of spectacular speculative misfortunes.

In contrast to most factor ETFs, Momentum is a chameleon with the potential for drastic allocation shifts. Since 2013, every sector has experienced a dip to a near zero weight in the SPX Mo index, while at some point, six of 11 made up 25-67% of the weight.

The Russell 2000’s July collapse (-3%) was the first time since its ’25 low that it trailed SPX by more than a percentage point. A single month settles nothing. But it was enough to send us under the hood, where a couple of things caught the eye: breadth and lack of staying power.

Trading rather cheaply on some metrics, small caps have space for improvement even if the S&P 500 holds up. Still, given the index’s vast earning power amassed from the AI data-center boom, we are not ready to call a major turn in the large-cap/small-cap horse-race just yet.

S&P 500 >30% earnings growth occurred only two other times since 1990—both were rebounds out of severe downturns. Today’s expansion is propelled by a narrow list of firms exposed to the AI data-center theme; an eventual loss of confidence in such AI outlays could prove disastrous for earnings and stock prices.

In an unusual twist, one of the cheapest industries today is part of the hottest theme piloting the bull market higher: The world’s leading memory chip companies can be purchased at P/E multiples less than 7x earnings.

S&P 500 Q2 estimated bottom-up operating EPS have rocketed 19% higher since the start of June. This extends the trend of rising EPS projections that we’ve documented the past year-and-a-half. Yet, the magnitude of this revision is like nothing we’ve seen before—just last quarter, we were blown away by Q1’s 11% surge. EPS growth, combined with flat performance the past few months, has taken a material bite out of some of the generationally high multiples that have hung over this market the past few years.

Read this week's Major Trend. 

Read this week's MTI update

Read this week's MTI update

Read this week's update.

Elevated readings in Citi’s U.S. ESI have lately been regularly accompanied by disappointing market returns. Our study of 27 past instances finds that “good-news-is-bad-news” episodes have tended to be self-correcting. Strong economic surprises eventually become harder to beat, and the ESI rolls over.

The dot-com era was mostly a public-market event, while the AI boom has been largely funded through the balance sheets of hyperscalers and private capital. That distinction is quickly eroding. Once quietly contained on private balance sheets, the risk is now going public.

Growth’s P/E gap between trailing and forward EPS is over 10 points—historically high and challenging the 1999 peak. One’s opinion about Growth depends heavily on whether they are looking backward or forward in their P/E calculations.