Research.LeutholdGroup

Even after watershed events COVID-19 and MMT, some things never change.

Next year will begin like almost every one of the past dozen years, with economists and strategists expecting bond yields to rise.

Unlike most of those years, though, there are several measures of “cyclical pressures” that would seem to give them a good chance of being right. The best-known among these might be the “Copper/Gold Ratio,” popularized by DoubleLine’s Jeffrey Gundlach, which suggests 10-Yr. Treasury yields should be around double their current level (Chart 1).

• Read more

It’s been popular to argue that U.S. government bonds are a bubble while U.S. equities are not. But even if we agreed, the potential cyclical total return losses in Treasury bonds are a fraction of those likely to occur in an equity bear market.

• Read more

Yields on 10-year Treasury bonds have still not breached the 3.00% level that many believe will stick the proverbial “fork” in the secular bond bull market that began in 1981. That could well in happen in the next few weeks, but we believe it’s important to step away from the daily fray and reflect upon the damage that’s already been done.

• Read more

While we still believe flattening is the more likely scenario over the medium term, we do feel the recent flattening move is a bit overdone and there are several divergences that suggest a short-term steepening correction is in store.

• Read more

Sometimes we feel compelled to report findings that conflict with our outlook. And then there are the even rarer times we actually do it.

• Read more

Last week we overlooked a key milestone among the daily parade of new stock market highs: The Stock/Bond Total Return Ratio finally exceeded its cyclical high from the summer of 2007. Since July 13, 2007, the S&P 500 has generated a cumulative total return of +73.5%, just ahead of the U.S. 10-Year  Treasury Bond total return of +70.0%. These work out to annualized returns of around 6.0%.

• Read more

Liquidity “consuming” strategies like price momentum are generally considered to be more volatile than liquidity “providing” approaches like value investing.

• Read more

Last month we discussed the negative market implications of May’s “Death Cross” signals in the Dow Transports and Dow Utilities.

• Read more

With the quantitative horsepower now available at the fingertips of even the most technophobic portfolio manager, there’s little tolerance for any model that finds itself out of sync. But “broken” models (and especially value-based ones) have an eerie way of reasserting their relevance just after they’ve been finally tossed to the trash heap.

• Read more

The investment leadership of a given year has historically had better-than-even odds of outperforming in the following year at both the asset class and equity sector levels.

• Read more

The recent upside breakout in the U.S. 10-year yield was successful, and it appears interest rates will remain in the new higher range for now. But what are the short-term implications of higher U.S. Treasury rates on asset allocation decisions?

• Read more

We still think interest rates are likely to be range-bound, but the range will likely shift higher to the 185-240 bps area if the current breakout is successful.

• Read more

We think interest rates will stay low for an extended period of time, so the key question is, when will rates start rising?

• Read more

Those adopting LDI today are doing so at the least opportune time in more than 60 years.

• Read more

Investor infatuation with portfolio income is higher than ever, just as there is less of it available than at any time in history.

• Read more

The failed break-out to the upside on the U.S. 10-year yield fits our expectation of a range-bound but higher-volatility environment.

• Read more

Yes, we consider U.S. Treasury securities a bubble across the entire yield spectrum, and the situation has probably now moved into “extra innings” (think 10th or 11th) thanks to the flight to (perceived) quality triggered by the European debt crisis.

• Read more

Today’s bond market is reminiscent of the stock market in April 2000—when the first cracks in tech and telecom had appeared.

• Read more

Whether it’s the start of a new bond bear market or not, there’s no need to rush... and why shorting bonds may not be the best idea, even during a bond bear market.

• Read more

Leuthold’s Eric Weigel examines both positive and negative tail risk among asset classes over two time periods… the recent volatile era versus a preceding, not-as-volatile time period.

• Read more

Andy Engel revisits our Stock/Bond Performance Differential study which examines rolling stock/bond spreads over various time periods and subsequent asset class returns.  It appears that trends are finally reverting slowly toward the norm.

• Read more

The new deal reached by Congress has little substance and no impact at all until 2014 or beyond. More “kick the can down the road.” Long term debt/deficit issues remain unsolved.

• Read more

The inability of our politicians to recognize and resolve short and long term debt/deficit issues has caused many of us to lose even more confidence in Washington.

• Read more

U.S. likely averted worst-case scenario of default, but credit rating downgrade is still likely. Main impact of downgrade is not the increase in interest rates itself, but rather the liquidity risk in all markets that involve treasury securities as collateral.

• Read more

$4.8 trillion of the additional $9 trillion in debt that Uncle Sam is expected to incur over the next decade is interest obligation.

• Read more

In mid-May, we re-initiated a short position across all three tactical funds in U.S. Treasury bonds.

• Read more

Long term interest rates could continue rising, as inflation expectations increase and investors demand higher yields.

• Read more

Bond bubble deflating, as investors demand higher yields to compensate for rising inflation and mountain of debt.

• Read more

The bond bubble is deflating, as investors demand higher yields to compensate for expected rising inflation and the U.S. mountain of debt.

• Read more

History appears to be repeating itself as the risk premium for stocks is making a comeback. Ten-year Treasuries are now the riskier asset class compared to equities.

• Read more

Stock/bond Risk-reward relationship beginning to return to normal. Back in Q1 2009, performance differential between S&P 500 and 10 year T-bonds was at generational lows. In prior periods of bond superiority, stocks ultimately came soaring back. Expect to see stocks do much better over next 5 years.

• Read more

It’s easy to see why equity investors are so down when looking at updates of the long term stock market performance. It’s even more depressing when long term equity returns are compared to bond returns.

• Read more

The longer term data does suggest that at current interest rate levels, investors can expect sub-par returns over the next 1, 3, and five year timeframes— and we use the term “sub-par” quite literally.

• Read more

Jim Floyd is boosting his 12 month interest rate targets by about 50 basis points across the board. The economy is expected to be showing signs of recovery by year end 2009, and the credit markets are thawing.

• Read more

Since economic fundamentals are providing little help lately, an understanding of bond sentiment has become especially helpful.

• Read more

Expect economic recovery to pick up a little steam in early 2007, before slowing down in the second half. A 2008 recession is a possibility. 

• Read more

Despite the December correction, our 10-week Hines ratio (a modified put/call ratio) continues to show rampant speculation in T-bond futures call options, suggesting speculators are still betting on declining yields. 

• Read more

Does consumer confidence offers any insight into future spending patterns? Also, the case for shorting T-Bonds.

• Read more

Recent 25 basis point bump-up by Fed will not be the last. More tightening seems likely but T-bonds now look to be in the high end of a buying zone.

• Read more

Big Rise in Treasury yields has resulted in improved risk/reward profile for T-bonds.

• Read more