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Normalized P/E

Nov 07 2018

Emerging Markets: Not Persevering, Just “Preserving”

  • Nov 7, 2018

We’ll never know how world events might have evolved had Mitt Romney won the presidential election in 2012. But thanks to the wonderment of Emerging Markets’ underperformance, we can go right back to the last days preceding that fateful election.

Oct 05 2018

The Two-Tiered Global Market

  • Oct 5, 2018

We should emphasize that our characterization of stocks as dangerously overvalued applies only to the U.S. market.

Mar 15 2018

Foreign Stocks: What Will Turn The Tide?

  • Mar 15, 2018

After a brief respite last year, EAFE has reverted to its old form by falling 300 basis points behind the S&P 500 so far in 2018. EAFE’s main transgression might simply be that it represents good relative value in a market that’s been rewarding only momentum...

Mar 07 2018

Leverage Factor: A Boost For High Quality Stocks?

  • Mar 7, 2018

A review of Quality factors, as well as the lower valuations of High Quality stocks, supports the current High Quality cycle amid rising market volatility. The Leverage factor may provide particularly strong backing for High Quality stocks.

Mar 07 2018

Nine Corrections In Nine Years

  • Mar 7, 2018

The stock market’s nine-day decline off its January 26th high met our definition of an intermediate correction—an S&P 500 loss of between 7-12%.

Nov 07 2017

Cap Weight Or Equal Weight?

  • Nov 7, 2017

The Equal Weighted S&P 500 now trails the S&P 500 by 400 basis points YTD, and the rally is increasingly assailed as too narrow.

Nov 07 2017

Small Cap Valuation Check

  • Nov 7, 2017

We don’t have a strong capitalization-bet recommendation, other than to remind readers that Small Caps have been especially responsive to the favorable seasonal window that began November 1st (and which extends through April 30th).

Sep 08 2017

Could It Be A “Two-Fer?”

  • Sep 8, 2017

The milestones achieved by the current cyclical bull market have been so numerous that we hope you’ll forgive us for missing one back in May.

Dec 07 2016

America’s Already First...

  • Dec 7, 2016

Thanks to the U.S. dollar’s recent spike, foreign equities in dollar terms declined during November while the U.S. markets were celebrating a Trump victory. Thirty-nine of the 49 MSCI country indexes are in bear market territory from the perspective of a dollar-based investor.

Nov 05 2016

Has The Fed Already Hit Stocks?

  • Nov 5, 2016

One never appreciates what he or she has until it’s gone. In our case, during the many years it was freely available, we failed to appreciate the zero interest rate. Now that it’s gone, we already feel pressured to join a game where we (and very few others) have any edge: Fed-watching. Our real edge is that we recognize this.

Jul 08 2016

Low Quality Dominance Since March

  • Jul 8, 2016

After two rough months moving into 2016, Low Quality stocks rallied and are now leading High Quality stocks YTD. Investors apparently brushed-off the slowdown scare from China, and later the Brexit headlines.

May 06 2016

Small Caps: The P/E Premium Lives On…

  • May 6, 2016

Small Cap valuations may look better on a relative price-to-book basis, but we still believe their Normalized P/E ratios will suffer further compression before Small Caps reclaim the leadership baton.

Feb 05 2016

The Bullish Case: A Mental Exercise

  • Feb 5, 2016

We’ve been correctly positioned near our tactical portfolios’ equity minimums, yet we’re oddly compelled to use this month’s “Of Special Interest” section as a very public second-guessing of that move.

Jan 08 2016

Small Cap P/E Ratios: Not Yet Low Enough

  • Jan 8, 2016

When the Fed surreptitiously began to tighten as we believe (via tapering), in January 2014, history suggested that Consumer Discretionary and Small Caps would be the most likely initial market victims (at least from a relative perspective).

Oct 07 2015

Valuations: The Bad And The Good

  • Oct 7, 2015

Foreign valuations experienced nowhere near the expansion enjoyed by U.S. stocks during the latest bull market, but their cheaper valuations rarely seem to inoculate them from outsized losses during corrections and bear markets.

Sep 09 2015

The EM "Trap"

  • Sep 9, 2015
We expect EM valuations will undercut their 2008 lows before the current market decline has run its course. That washout might serve up the best stock market bargains in many years.
Aug 07 2015

Minding The Gaps

  • Aug 7, 2015

We think stock market action in the next few months will provide the Fed with an excuse to skip any rate increase in 2015. But our view is a minority one, and futures’ market odds on a September increase shot up in early August. Either way, the obsession over the timing of a Fed rate hike ignores the fact that world P/E ratios are already contracting—at least on the basis of our 5-Year Normalized EPS.

Aug 07 2015

Emerging Markets: A Half-Off Sale!

  • Aug 7, 2015

The Chinese government’s repeated stock market intervention attempts over the past several weeks have been remarkable, and obviously antithetical to the country’s move toward a more laissez faire corporate environment.

Jan 08 2015

Small Caps: A New Ratio!

  • Jan 8, 2015

Small Caps lagged the S&P 500 by almost ten percentage points in 2014, but their underperformance streak technically dates back to April 2011. Nonetheless, their cumulative, 45-month underperformance in relation to the S&P 500 (now about –18%) is still modest enough that any mention of the current “Large Cap Leadership Cycle” is bound to draw a few head scratches.

Jan 08 2015

High Quality Cycle In Force; Ideas For High Quality Energy Stocks

  • Jan 8, 2015

In early October 2014, we noted the momentum reversal of Low Quality stocks and a few signs of the likelihood of transitioning to another phase of the quality cycle. The official numbers of Q4 have confirmed this.

Dec 05 2014

The Dollar And Foreign Equities

  • Dec 5, 2014

Xenophobia continues to be a handsomely rewarded trait for U.S.-based equity investors, with the MSCI World Ex USA Index down 3.8% YTD through December 3rd—and now (incredibly) unchanged from its May 2011 high. Comparable period gains for the S&P 500 are +12.2% YTD and  +50% from spring 2011 highs.

Nov 07 2014

U.S. Versus Foreign Stocks: More Of The Same

  • Nov 7, 2014

Long before the U.S. dollar began to rebound, the current bull market in global stocks had already favored “provincial” portfolio managers focusing solely on U.S. stocks.

Aug 07 2014

Small Cap Premium Finally Shrinks—But Remains Historically Extreme

  • Aug 7, 2014

July’s Russell 2000 -6% rout finally deflated some of the Small Cap valuation premium we’ve been grousing about in recent years.

Nov 07 2013

How Long Can Small Caps Lead?

  • Nov 7, 2013

The Russell 2000 is about five points ahead of Large Caps YTD, and is approaching its April 2011 long-term relative peak. We view this outperformance as their leadership’s last gasp and not a new cycle.

Jan 07 2013

A Peak At The Rear-View Mirror!

  • Jan 7, 2013

We’ve lately made it a January tradition to publish a “Rear View Mirror” forecast for S&P 500 returns out to the end of this decade.

Oct 04 2012

Leuthold Stock Quality Rankings: Starting To Favor Low Quality

  • Oct 4, 2012

Our Stock Quality Ranking work currently shows stocks with low quality rankings outperforming those with high quality rankings.

Sep 07 2012

Major Trend Index Fading As “That Time Of Year” Looms

  • Sep 7, 2012

With “That Time Of Year” approaching and the Major Trend Index not too far above the neutral zone, we review nine factors impacting the stock market from a glass-half-empty perspective.

Apr 04 2012

Stay Bullish

  • Apr 4, 2012

It’s April once again… Are we due for yet another market top? Some perspectives on the possibility of attaining a new all-time market high in the current cyclical bull, and what may drive the upside.

Jan 05 2012

Leuthold Stock Quality Rankings

  • Jan 5, 2012

Leuthold Stock Quality Ranking work is currently showing that High Quality stocks outperformed during 2011. More upside for High Quality stocks going into 2012?

Mar 04 2011

Valuations: The Good And The Bad

  • Mar 4, 2011

S&P Normalized valuations are already in the zone that have defined many important bull market tops.

Jan 05 2011

2011 In 2019?

  • Jan 5, 2011

Year-ahead stock market forecasts are now in hot demand, but of course are notoriously off the mark most years. Very long term forecasts (say, out to the end of the decade) are in virtually no demand, but are considerably easier to get close to the mark for those armed with the right tools. 

 

Dec 04 2010

A “Quality” Opportunity?

  • Dec 4, 2010

Low quality stocks led out of the past bear market, as typically occurs. Despite being the clear winners from the 2009 lows, it looks like the lower quality stocks can continue to outperform given current valuations and momentum.

 

May 04 2010

Quick Takes From The Valuation Dashboard

  • May 4, 2010

Stock market valuations no longer cheap, but they are also not yet truly expensive. Eric Bjorgen isolates several valuation measures to show just where they rank historically

Jan 04 2010

U.S. Stocks: What If The New Decade Is “Normal”?

  • Jan 4, 2010

While most are content to make annual predictions at this time, leave it to Doug Ramsey to bite off an even bigger piece…predicting the next DECADE.

Jan 04 2010

Our Outlook For 2019 (...2010 To Come Later)

  • Jan 4, 2010

While most are content to make annual predictions at this time, leave it to Doug Ramsey to bite off an even bigger piece…predicting the next DECADE.

Nov 04 2009

Valuation Constraints?

  • Nov 4, 2009

There is a potential valuation ceiling confronting U.S. stocks. 2002 S&P valuation lows may be the point that this cyclical bull market tops out.

Oct 05 2008

The Beginning Of The End.....Yes, We’re Talking About The Bear Market

  • Oct 5, 2008

September was a horrible month for the stock market, but now is not the time to be selling stocks. We believe a market bottom is close at hand, and this month’s “Inside The Stock Market” section presents several of our “big picture”, historical market studies to provide support for this belief.

 

Aug 05 2008

What If We Don't Bottom Around Median Levels?

  • Aug 5, 2008

While we continue to believe in our market bottoming thesis, we thought it may be useful to examine those periods when the P/E ratios continued to fall to the 10x to 12x earnings levels.

Mar 05 2008

The Median P/E Valuation Benchmark

  • Mar 5, 2008

When stocks get back to median valuation levels, the odds are the stock market is at or close to its lows.

Feb 05 2008

The Historical Significance Of Median P/E Valuations

  • Feb 5, 2008

70% of all the market declines since 1945 (post WWII), bottomed within 10% of the median historical normalized P/E ratio.