Performance
SPACs: More Analysis Of Past Deals
Last month, we briefly discussed a burgeoning investment vehicle—Special Purpose Acquisition Companies (SPACs), also known as “blank-check companies.” Since the sole purpose of a blank-check company is to find an operating business to merge with, and subsequently bring it public, the best method to gain some understanding about the outcome of these relationships is to look at past deals.
After The “Thrust”…
We’re concerned that cyclical groups, which normally catch fire after a breadth thrust, are tracking along the bottom (or below) the previous worst-case outcomes following identical breadth-thrust signals.
Should You Trust The Thrust?
There are two concerns with the latest bullish thrust signal, with one, in part, causing the other. First, the S&P 500 return preceding the MBI thrust signal was +42.8%, almost triple the average slippage of +15% associated with all prior signals.
The Active Goose, The Passive Gander
Raise your hand if you’ve heard this one before:
(A) 80% of active funds underperformed their index over the past 10 years.
Now, keep your hand up if you have also heard this:
(C) Therefore, investors should buy passive index funds.
Utilities Sector: What’s Driving YTD Performance?
We review the somewhat out-of-character performance of the Utilities sector to try to pinpoint what is influencing results. This article touches on several potential drivers for the sector’s relative strength.
Factor Failure: Don’t Blame FANMAG
Our recent commentary “1” For The Record Books noted that just one of seven S&P smart beta factors was able to outperform the S&P 500 last year, even though each style basket limits its holdings to constituents of the parent index.
The Easy Fed and the “Other” Inequality
Super-easy monetary policy has been blamed for the rise in income and wealth inequality in recent years, and more recently we’d fault the Fed for performance inequality within the stock market.
Taking A Punt On U.K. Stocks?
The June 2016 Brexit referendum kicked off a tortured process for the United Kingdom to leave the European Union. However, the wheels of international politics turn slowly, and the original date of formal withdrawal was set as March 29, 2019. As the calendar rolled into 2019 it became obvious that the March closing date was not going to be met, and concerns mounted over delays, procedures, deal-or-no-deal, a new prime minister, and even calls for another vote.
Worrisome Profitability Trend Among Small Cap Companies
Despite a historic economic expansion during the past decade, there is an ever-increasing number of companies that are finding profitability has become harder to achieve.
Sector Concentration And Effects On Country Performance
Is the performance of certain countries mainly driven by particular sectors? And, does U.S. sector performance drive the performance of other countries? (i.e., when U.S. Financials underperform, do foreign countries with large Financials sector weights underperform?). We did some data crunching to address the second question.
“De-Worsification” Ruled In 2018!
The market difficulties of 2018 were hardly limited to stocks. Commodities, in fact, were the worst performer among the seven major asset classes.
3% Yields Proved To Be High Enough
In September the popular claim was that “interest rates were rising for the right reasons,” and still too low to threaten stocks or U.S. economic expansion.
Narrow Performance Divergence Among EM May Not Last
We’ve previously noted the narrowing performance divergence between top- and bottom-performing Emerging Market (EM) countries in recent years.
Research Preview: Sector-Adjusted Factor Returns
This article summarizes our current research into the interaction between factors and sectors. We find that sector weights have a significant influence on some factor results, while the true factor impact is the key driver for others. Watch for our full report coming next week.
What’s Ailing The Staples?
The setback that began in late January qualifies as the sixth intermediate correction of the current bull market, where “intermediate” is defined as an S&P 500 loss ranging between 7%-12%...
Recessions & The Stock Market
In the last couple of months, we’ve come across a handful of economic “check lists” purporting to show the relative absence of recession harbingers as the expansion closes in on its ninth anniversary this summer.
Bridesmaid Strategy: Picking The Year’s Best Asset
Here’s another way to look at the persistence of momentum across asset classes for the last 45 years.
A Study On Closed End Funds
In March 1991, an article titled “Investor Sentiment and the Closed-End Fund Puzzle” was published in The Journal of Finance.
The Intelligent Use Of Smart Beta
Quantitative investing has become an integral component of professional investment management, and smart beta funds have become popular vehicles for advisors as they assemble actively-managed client portfolios.
Quantitative Factor Performance: Year In Review
Factor performance during 2016 is the reverse of that of 2014-2015. Quants and smart beta funds focusing solely on Value have enjoyed the year, while multi-factor approaches have struggled. Value has been the only factor that has provided positive performance this year.
Not Much “Lift” From VLT “BUY”
In the June Green Book, we professed some skepticism surrounding the long-term, “low-risk” BUY signal for stocks that was triggered at the end of May by our Very Long Term (VLT) Momentum algorithm (also known as the Coppock Curve).
“Index Rebalance Effect” Once Again Proven
Validating results of a prior study, a look at the last four MSCI index rebalances shows that stocks soon to be added outperform from Announce Date to Effective Date, while deleted stocks underperform.
The Fed’s Capitulation To The Dovish Side— A Win-Win For EM & U.S.
We have mentioned a number of times that China had experienced a very unpleasant “second-hand” tightening due to its peg to the dollar. Its trade competitiveness has suffered tremendously. With a weaker dollar the Chinese Yuan can re-gain some of its competitiveness while maintaining its peg to the dollar. A rare win-win in today’s convoluted world of finance.
Asset Allocation: No Upside In 2015
Hedge funds have shuttered by the dozen in the past few weeks, with the worst carnage among those focused on Emerging Markets and commodities. But the problem is broader.
The Pause That “Depresses”?
The blue chip U.S. indexes have gone nowhere in 2015, and we expect bulls will soon write off the year as the “pause that refreshes.” But what’s been refreshed?
New Month, Old Worries...
While the S&P 500 had erased all but 2% of its August loss as of early December, Small Caps and the “average stock” had recouped only about half their correction losses. Not good.
Quantitative Factor Performance: What Is Working?
For the third consecutive year (thus far), quantitative factors worked best within the Materials sector. Energy also saw success as the decline in oil hurt the same stocks as in 2014. Factors were least effective in Health Care and Telecom.
What’s Driving EM Currency Weakness?
A strong dollar and low commodity prices are major forces dragging down EM currencies across the board.
Recession? Too Early To Call
Among the various arguments put forward by those believing the recent decline is no more than a correction, the most difficult for us to address is the common claim that “there’s no recession on the horizon.”
A Good Year For Leuthold Industry Group Scores
Last year was a solid one for the Group Selection (GS) Score approach, with the Attractive list delivering a total return of +13.1%—more than 500 basis points above The Leuthold Group Universe average, which gained only +7.9%.
Thoughts On Energy
The recent Energy sector decline has accomplished the feat of wiping out all of the upside gains achieved during its “Third Act” played out in the 2006-2008 surge.
High Quality Cycle In Force; Ideas For High Quality Energy Stocks
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.
Quantitative Factor Performance: What Is Working?
Six of the seven factor categories we track have turned in positive performance so far in 2014; Value is the exception. Lost in the numbers is that most of the value has come from the short quintiles, so it has been hard for managers to take advantage of this trend.
The Short Side—Still Ahead YTD
Our AdvantHedge Composite lost 5.9% in July, lagging the inverse performance of the S&P 500 (5.1%), but outpacing both the NASDAQ (6.6%) and the Russell 2000 (7.0%) as the market returned to “risk-on” mode.
The Short Side - Slightly Ahead YTD
Info Tech remains the largest sector short position, while Energy is second.
The Short Side — Slightly Ahead YTD
Info Tech remains the largest sector short position, while Energy is second.
Iraq Withdrawal? “No-Win” Military Conflicts’ Impact On the Stock Market
Is market rallying in anticipation of conflict resolution in Iraq? Bush will be under increasing pressure to resolve things before the 2008 Presidential election. We look at the Korean conflict and Vietnam war for clues about how this possible resolution in Iraq may play out in stock market.
Group Selection Scoring System: 2005 Performance Review
Group Selection Scores worked well in 2005. Buying top 20 ranked equity groups each month based on GS Scores produced a 19% gain for the year, well above the 3% S&P 500 performance (price only).
Did You Have The Right Mix In 2005?
2005 Performance Recap: Equities, Fixed Income, Large Vs. Small Caps, Weighted Vs. Unweighted S&P 500, Industrial Metals and AdvantHedge.
November Market Action
Back at the end of October, virtually all of the primary stock market indexes were slightly underwater on a YTD basis, but November’s market action changed all that with an impressive rally.