Research.LeutholdGroup

While the consensus view remains that October’s stock market rout was “healthy” and “overdue,” we think it was  more likely the first leg down of much larger decline. But it’s still worth reviewing the improvement in valuations that market losses and this year’s excellent fundamentals have combined to produce.  

• Read more

In the March Green Book, we discussed the long history of stock market difficulties during mid-term election years. Incredibly, nine of the past 11 cyclical bear market lows have occurred in these years, with eight of those nine recorded during the seasonally-weak months of May through October (Table 1).

• Read more

During the stock market’s protracted retracement of its January/February decline, we speculated a few times that the final outcome might look similar to the bull market tops of 1990, 2000, and 2007.

• Read more

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.

• Read more

Momentum is one of the most successful investment styles over the long run, and does particularly well in the later stages of a bull market during the run-up to an eventual peak.

• Read more

We think the odds are better than even that the September 20th S&P 500 high will stand as the stock market high for 2018, and perhaps also as the high for a historic event begun back in 2009. We’re well-prepared for that possibility, with the Leuthold Core now positioned today with net equity exposure of just 37%.

• Read more

In recent commentaries, we’ve highlighted the surprising number of U.S. stocks making 52-week lows on both a daily and weekly basis, a sign that the market’s push higher has become more fractured. While pondering the significance of those lows, however, we missed a new 52-week high last Friday in a series we think will be especially critical to the stock market’s near-term fortunes: the 10-year U.S. Treasury bond yield. Specifically, the yield matched its weekly closing high of 3.07% posted on May 18th.

• Read more

The S&P 500 reported blockbuster earnings growth again in the second quarter of 2018. With the corporate tax cut boosting profits this year, we were curious to know how much of the improvement was tax driven and how much was due to the exceptionally strong economy.

• Read more

In the past year, big-name bond gurus have put forth various yield targets that, if exceeded, would provide definitive proof that the secular bull market in Treasury bonds begun in 1981 had finally ended.

• Read more

Trying to monitor the dozen or so regional purchasing-managers’ surveys released prior to the monthly national report  invites a perpetual case of whiplash...

• Read more

The S&P 500 has closed within a half percent of an all-time high three times this week, and the S&P 1500 Composite did make such a high on Tuesday, August 21st...

• Read more

“That which does not kill us, makes us stronger” might be a good motto for this never-ending bull market. The bull continues to shrug off the effects of both Quantitative Tightening and an escalating trade war, and it’s doing so during a seasonal stretch in which many of its predecessors have sunk to their knees (if not their demise).

• Read more

Our ongoing research into the relative performance of Active vs. Passive fund styles is based on the belief that just as market conditions cycle, so does the active-passive return spread.

• Read more

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.

• Read more

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.

• Read more

While momentum has been the best-performing stock selection factor in 2018, there’s a less well-known and purely fundamental factor that rates almost as well: A company’s ability to lose money!

• Read more

We have recently been struck by the tremendous valuations being awarded to companies that have never turned a profit. Tesla, Spotify, Workday, and Square all sport market caps above $25 billion based not on their recent earning power (which is zip), but on the hopes that they will one day move well into the black.

• Read more

The stock market liquidity squeeze we’ve discussed this year hasn’t played out quite like we expected. Traditionally, Fed tightening and slowing money growth hit Small Caps earlier, and harder, than the blue chip stocks...

• Read more

An important feature of this bull market—and a reason for its longevity—is the slow recovery in investor attitudes relative to valuation altitudes...

• Read more

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...

• Read more

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. 

• Read more

Last week’s piece challenged the now popular view that new highs for the Russell 2000 are a decisively bullish factor for the stock market in the near term. To our surprise, we found that market returns during periods of well-defined Small Cap leadership are significantly lower than when Smalls are laggards.

• Read more

The Russell 2000 closed above its January 26th high on Wednesday, and well beforehand bulls had seized upon the secondary stocks’ leadership as evidence that all is right again with both the U.S. economy and stock market...

• Read more

The 2017 run that pushed the nine-year bull market to all-time highs made it very difficult to find anything that looked cheap, and few choices that looked average. Even the Tech bubble of 1999 allowed investors to find moderately priced stocks among the mundane old-economy companies...

• Read more

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.”

• Read more

Athletes aren’t the only ones known to sometimes suffer a “sophomore slump.” Presidents do, too… at least according to the historical verdict of the stock market...

• Read more

Analysts are still coming to terms with the impact of the big corporate tax cut, as shown by the dispersion still existing across S&P 500 EPS estimates in 2018. But they should also be watching the line item that’s contributed the most to the breakout in profit margins above historical levels: interest expense...

• 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

The Major Trend Index fell into its negative zone last week and we trimmed the already below-average net equity exposure in tactical accounts by a few more points, to a current 41-42%.

• Read more

The deterioration in stock market liquidity remains at the forefront of our concerns and is a key reason that the Major Trend Index is hovering just above its bearish threshold of 0.95...

• Read more

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...

• Read more

Ten weeks into 2018, we have already seen three mini-cycles in U.S. equities. A rip-roaring surge in January was followed in early February by one of the shortest corrections in history...

• Read more

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%...

• Read more

While watching a forecast go awry is painful, there’s an alternative that we consider to be even worse: the failure to be paid on an accurate forecast. The resulting feeling of helplessness must be similar to that of a corporate director who manages to lose money on inside information.

• Read more

For at least the last year we have argued that late bull market conditions would tend to reward momentum strategies over mean-reverting ones. That’s played out not only during the market’s melt-up phase, but also (to our surprise) during the recent two-week air-pocket, at a time when we would have expected to see at least a temporary setback in the ratio above.

• Read more

Our ongoing research into the relative performance of Active vs. Passive fund styles is based on the belief that just as market conditions cycle, so does the active-passive return spread..

• Read more

The Low Volatility theme has been the darling of this bull market, benefiting from years of skepticism surrounding the economic expansion and the related lack of competition from fixed income instruments...

• Read more

We’ve participated in this year’s upside market surge, while at the same turning a bit wistful in remembrance of a simpler and saner stock market era—an era when one could buy more than a third of the Leuthold 3000 stock universe for less than 14x earnings. Yes, that’s the comparative period of stock market sanity that existed in late February 2000, just days before the NASDAQ Composite made its historic bubble-era peak.

• Read more

The bull market continues to behave like one that’s in a late—but not terminal—phase. After a stumble late last year, the Momentum leaders have already reasserted their dominance, opening up a four percent lead on the Value stocks YTD after crushing them in 2017.

• Read more

Growth has trounced Value over the past year, continuing a decade-long trend of outperformance...

• Read more