S&P 500
A Scary Chart, Revisited
For a couple years, we’ve labeled the S&P 500 Price/Sales ratio as the scariest chart in the Leuthold database, and last year’s decline did little to improve its intimidating appearance.
Time To Jump Back In?
A few pundits have suggested that Jack Bogle’s death in January might prove to be the symbolic capstone to a cycle in which passive investing has completely dominated the full-fee, active money-manager ranks.
The Correction In Historical Context
While it’s too early to let the ink dry on the accompanying table and chart, we’ve decided to add last year’s decline for comparative purposes.
Same As It Ever Was?
February’s Oscar win validated our efforts to make the ‘Green Book’ suitable for all audiences, like our decision to relegate “bottom-quartile” valuation outcomes to the very back of the publication.
Once In A Lifetime?
To paraphrase a talking head and the Talking Heads, someday you might find yourself in a beautiful deleveraging, with beautiful valuations, and you may ask yourself, well, how did I get here?
Yet Another Anniversary?
We received two media calls in December hoping we would comment for upcoming special features about the tenth anniversary of the bull market. We rolled our eyes.
2019 Earnings: Don't Bet On 6%
Currently, the collective intelligence of Wall Street is predicting 6% S&P 500 EPS growth in 2019. It’s also the 61-year average annual growth rate for the index, so how wrong could it be?
Guess-timating The Downside
While our market disciplines remain negative, we certainly aren’t oblivious to the haircut in equity valuations that’s already occurred.
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.
Assessing The Damage
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Our tactical accounts remain positioned very defensively, and we have yet to see the sort of capitulative market action that would lead us to lift any existing equity hedges.
Estimating The Downside: The G-Rated Version
The longevity of this bull market is impacting tactical asset allocators in ways great and small.
S&P 500—Valuation Check-Up
In late January we speculated how long it would take for the S&P 500’s bloated valuations to reach more reasonable levels. The S&P 500 now trades back where it was in January and the seven-month break included some of the best growth rates most have ever seen. We found ourselves asking: Did chubby Mr. Market shed any pounds as he pedaled away on his stationary bike?
Breakout Or Fake-Out?
The S&P 500 has fully erased its January and February losses, but there’s probably a market message in the fact that it took so long to do so.
Beware The Breakout
The S&P 500 finally erased the losses from its nine-day swoon in January and February.
Assessing The Correction
How do today’s cyclical conditions stack up with those accompanying other stock market declines?
A Launching Pad??
A few clients pointed out that the longest-ever recovery from an intermediate correction (Apr. 1994–Feb. 1995) became the base from which the S&P 500 would eventually triple over the next five years. We’re not equipped to address that possibility in an objective fashion, so we’ll let you be the judge.
No, It’s Not Y2K Again…But The Lights Could Still Go Out
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For the last year, we have labeled the S&P 500 Price/Sales ratio—which has returned to its Y2K bubble levels—the “scariest chart in our database” (Chart 1). Recall that the initial visit to present levels was followed by the S&P 500’s first-ever negative total return decade.
How The S&P 500 Could Hit 2,500… Ten Years Out
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Yesterday was the six-month anniversary of the S&P 500 bull market high, and the index celebrated the event by nearly setting a new peak. Meanwhile, the S&P 500 Total Return Index did make a new high on Wednesday.
Multiple Personality Disorder?
Market behavior is always nebulous enough to generate diverging opinions, but lately it’s been sufficiently strange to give rise to a diverging set of facts.
Full Employment And Rising Prices Aren’t Stock-Friendly
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Annual Producer Price Inflation rose to 4.0% in May, a key threshold above which the S&P 500 has historically delivered essentially flat returns. But the fact that this reading occurs against a backdrop of full employment is cause for even more concern. Context is key...
Is The Bull Just Napping?
Old age has certainly put no limitations on the bull’s exploits, so we should be cautious in reading too much into its meandering recovery path. However, it’s possible that action since the February low is not a recovery process but rather a countertrend bounce within a larger downtrend.
If You Think This Market’s Fishy, You’re Right
Tomorrow is the Minnesota season-opener for muskies, but the fanatics who chase them are likely disappointed that it comes a few days after an event that’s known to trigger these beasts: the full moon. The screenshot is from our $9.95 “iSolunar” iPhone app, and shows that Saturday merits only a “three fish” day (out of a possible “four fish”)—based on the moon’s fading illumination.
A New Hurdle For An Old Bull?
The first quarter S&P 500 earnings “beat” rate stands to be the highest in history, as any CEO with a pulse has learned to lower the hurdle.
The “Correction” Clock Is Ticking
2018’s S&P 500 setback qualifies as an “intermediate” correction. Historically, the duration of intermediate corrections is brief, and recovery time to move back above prior highs has also been brief. This year’s retracement route is already among the most meandering of all recovery paths since 1950.
Market Corrections And The Hazards Of Old Age
In difficult markets, we have become more appreciative of some of life’s small gifts. For example, it’s been quite a while since we’ve heard it argued that this is “the most hated bull market of all time.”
Musings On Margins
Fourth quarter earnings were the last ones to be burdened by a 35% top marginal corporate income tax rate, and therefore seem to have been given a pass by the analyst community.
Assessing The Selling
While the January 26th bull market high illustrated none of the hallmarks of a major cyclical top, there are secondary signs that a stealthy distribution process may be underway, such as an overwhelming bias toward opening market strength followed by intraday weakness.
Mid-Term Mayhem?
The prospect of a mid-term congressional shake-up may rattle the markets in 2018. Since 1962, nine major bear market lows occurred during mid-term election years, with eight of those happening during the traditionally weak months of May through October.
A Near-Perfect Model You Should Ignore
We somehow missed this signal in January, perhaps because we were pre-occupied with so many other signs of “climate change.”
1987 Parallels (Part 2)
At the risk of yelling “fire” in a crowded theater, we present a few parallels between recent action and the year leading up to the October 1987 crash.
Multiple Contraction—Just A Little Patience?
Things were bigger when you were a kid. Like that enormous sweatshirt your aunt gave you for your birthday or that hand-me-down ten-speed bike with the cross bar taller than your shoulders.
Estimating The Upside?
The remarkable stock market breadth and momentum chronicled in these pages doesn’t come without a price.
Kicking Off The Year... With A Good Year
During the first four trading days of 2018, the S&P 500 managed to match its 93-year average annual real price gain of +2.6%.
Is The Market Too Strong To Top Out?
We observed in July that at an age when most bull markets are prepared to see the mortician, this one still seems to need a pediatrician. And five months later, the bull is acting as immature as ever!
Yawn? Another Sentiment Warning
The stock market has disregarded any and all caution flags throughout 2017, and the consensus is that it will continue do so through year-end.
The Seasonality Of Earnings Season
Years ago, Monty Python’s classic comedy sketch introduced us to the Department of Redundancy Department.
Cap Weight Or Equal Weight?
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.
A Longer-Term Take On Sentiment
Stock market bears had a field day when the latest Investors Intelligence sentiment survey (Chart 1) saw the percentage of bullish newsletter writers spike to its “highest level since 1987.”
Revisiting The Y2K Highs
Bobby Knight thought coaching would be perfect “if it weren’t for those damned games.”
Time To Embrace "Equality"?
While this year’s rally has been a broad, “equal opportunity” affair, some of the weakest relative action we’ve observed has—oddly enough—been among equal-weighted stock market indexes. Equal-weighted indexes for Large, Mid, and Small Caps are all trailing their cap-weighted counterparts year-to-date, and the gap for the S&P 500 is now almost 400 basis points after an especially bad October.