We geek it up a notch and use some of the popular text-processing techniques to quantify the hawkish/dovish sentiment of the latest Fed statement. Some human “coaching” is needed in every step of the process (hence the “artificial” part). But when these tools are used properly for carefully chosen tasks, they can be quite intelligent.Read more
We get irked when TV pundits misrepresent the mood of equity investors as unduly pessimistic based one or two (or zero) data points. Among the dozens of “Attitudinal” indicators we track, an overwhelming majority show professional and retail investors have jumped back into the fray.Read more
A major driver of the division in recent performance among retail groups has been the burgeoning “nesting” theme. Stuck at home, consumers are directing their dollars toward indoor and outdoor home upgrades. A related theme has now established itself in the upper rankings of our group work—Housing.Read more
There is a consensus narrative suggesting that unless a stock is called Tech or FAANG, it is not participating in this stock market rally. Indeed, much consternation surrounds the fact that the FAANG 5 (the five biggest FAANG stocks) now comprise about 25% of S&P 500 total market capitalization.Read more
While the S&P 500 is still off by about 5% from its all-time high and is essentially flat since year-end, it has surged by 45% from its March bear market low. For many, its amazing recovery in the face of an ongoing pandemic and considerable evidence of strife on Main Street suggests caution is warranted.Read more
How can an equity manager possibly keep up with the QQQ—an ETF that’s almost 50% invested in the six largest U.S. companies?
Easy! Own the vehicle that benefits the most from a collapse in global trade volume and an escalating cold war between the U.S. and China—the EEM (iShares MSCI Emerging Markets ETF)!Read more
Of the many extraordinary events that have occurred so far in the contemporary crisis, U.S. economic policy is near the top of the list. Monetary and fiscal authorities have responded to this pandemic faster, and with greater force, than ever. Chart 1 introduces the U.S. Economic Policy Indicator, defined as the excess pace of money-supply growth above economic activity, plus the level of federal-deficit spending as a percent of nominal GDP.Read more
The Technology sector now comprises about 27% of the total S&P 500 market capitalization, its highest representation since it peaked near 34% during the 2000 dot-com bubble. Moreover, there is growing concern about the outsized impact of the popular FAANGs and the fact that so few companies are increasingly responsible for much of the overall stock market’s ongoing recoveryRead more
As we wade into the waters of second-quarter earnings, muddied by economic shutdowns and suspended guidance, we thought it might be a good exercise to pull back from the “micro” of firm-level beats and misses and examine the “macro” picture that is the Great Earnings Washout of 2020.
The non-seasonally adjusted headline CPI rose 0.6% (y/y) in June, a bit stronger than market estimates. The Core CPI maintained its 1.2% annual pace (Chart 1), which is also a tad stronger than the market expectations. There was very little market reaction to these new numbers since investors have learned to look through these numbers after COVID-19 and the latest numbers are not enough to impact any policy directions in the near term.
Read this week's Major Trend.Read more
Value stocks and growth stocks have recently created angst for investors. Value investing reflects an entrenched, losing momentum and the growth style increasingly appears like a bubble in search of a bust. This isn’t exactly a new trend—growth has been besting value for much of the last 15 years, but it has accelerated mightily since year-end, escalating concerns among both value and growth investors.Read more
The strong market rebound in the second quarter lifted the relative return of Growth vs. Value to an all-time high by the end of June. Chart 1 reveals that the cumulative S&P 500 Growth / Value return spread hit a new record last month, surpassing the previous high reached at the end of the Tech bubble in June 2000.Read more
What can slowdown the outperformance of Growth stocks? It turns out, the answer to that persistently-unanswerable question is “Not much.” Not even a global pandemic-driven sell-off and swift rebound. From the market high in February through June 30th, Growth handily outperformed every other factor.Read more
Following the market bottom, the rebound across retail industries has been robust, but a divide has emerged. Consumers’ needs and behaviors have dramatically shifted as former lifestyles were uprooted. This swift change in economics has resulted in clearly-defined sets of winners and losers among retail industries.Read more
There has been chatter about the Fed implementing the so-called Yield Curve Control (YCC). Although the latest FOMC minutes suggest that YCC is not on the agenda for now, we believe the chance of YCC is probably much higher than the market currently anticipates.Read more
While investors cheer the stock market on to challenge its all-time high, new COVID-19 cases are also making daily records in the U.S. The first wave of the pandemic helped to tank the S&P 500 by nearly 30% in the course of three weeks, while the second wave, now in development, has yet to deter the raging bulls.Read more
One of the signature traits of the U.S. small cap market is the prevalence of money-losing companies. Our recent tally indicates that even prior to COVID-19, 38% of small caps were reporting trailing year losses despite the widespread economic strength of 2019.Read more
Although the stock market’s VIX Volatility Index is back below 30 and continues to moderate from its surge in March, the Economy’s VIX Volatility Index is just beginning to explode! Over the last ten years, the average annualized quarterly growth in real GDP was 2.1%.Read more
During the first two months of the rally (and +30%) off the March lows, we noted that the usual cyclical leaders of a new bull market were underperforming on a relative basis, and there had been nothing even close to the “breadth thrust” that often accompanies an initial bull market up-leg.Read more
Many believe the stock market rally during this pandemic is nothing more than a sugar high orchestrated by the Federal Reserve. Liquidity trends have always been important for the financial markets, and undoubtedly, the outsized policy-push by monetary officials has played a significant role in the market’s recent success.Read more
Turn on financial television at any random time, and you’re likely to soon hear the argument that still-high U.S. stock market valuations are “justified” by extremely-low interest rates. We’ve countered that these low U.S. rates are simply a reflection of the secular slowdown in economic and earnings growth.Read more