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Chart Of The Week

Dec 01 2022

Jay Powell, The Chartist

  • Dec 1, 2022

When Jerome Powell took the reins of the Federal Reserve in early 2018, many commentators cheered the fact that he does not possess a Ph.D. in Economics. It will be many, many years before historians are able to conclude whether that’s a good or bad thing.

Yesterday’s action, though, left us wondering whether Powell might stealthily be in the process of earning a different designation—that of Chartered Market Technician (CMT). 

Nov 18 2022

How This Year’s Inflation Peak Differs From Its Predecessors

  • Nov 18, 2022

Our studies of economic and stock market history are meant to provide perspective, not an investment roadmap. But occasionally a current trend will resemble the past so closely it’s eerie.

Take the current inflation cycle. If (as we believe) June’s CPI inflation rate of 9.1% represents the peak for this business cycle, then many of its characteristics have lined up almost perfectly with the “average” of past inflationary episodes.

Oct 28 2022

Interrupting The Recession Debate With A Reminder Of How Hot The Economy Is

  • Oct 28, 2022

“Money illusion” continues to complicate analysis of the economy and financial markets. It might be a time when age and experience will actually prove helpful: Only investors who are 65 or older have experienced gaps between “nominal” and “real” data as wide as today’s.

 

Sep 30 2022

Time To Retire The Fed Model?

  • Sep 30, 2022

We’ve heard no references lately to the famous “Fed Model” for stock market valuation. We think we know why: The model’s usual proponents probably don’t like its current verdict—which is that stocks are far more expensive than at the early January market peak.

Sep 16 2022

Labor: Snatching Defeat From The Jaws Of Victory

  • Sep 16, 2022

This year it’s been popular to say the Fed will hike interest rates until it “breaks something.” Has that not already happened? Pull up charts of the Japanese yen, the British pound, and the euro, among others. And stateside, the Fed has broken one of economists’ favorite toys: the Phillips Curve.

Aug 19 2022

When There’s No Slack, It’s A Bad Time To Slack Off

  • Aug 19, 2022

The scene in our neighborhood in the last two summers has become one of relaxed and well-tanned professionals out in their yards overseeing home improvement and landscaping projects. No surprise: Not a single one has told us they’re less productive when working from home!

Aug 12 2022

Are You Better Off Than You Were Forty Years Ago?

  • Aug 12, 2022

Old timers will recognize our title as a twist on Ronald Reagan’s clincher in the final 1980 presidential debate with Jimmy Carter.

We recalled Reagan’s line while preparing for today’s 40th anniversary of the great 1982 secular stock-market low. Investors in the S&P 500 have earned an annualized total return of +12.4% since that trough, about two percentage points above the long-term average.

Jul 15 2022

Margin Pressure Under The Surface?

  • Jul 15, 2022

The spectacular economic rebound from the pandemic lockdown lifted corporate earnings to heights that are almost hard to fathom. That stupendous earnings run has been fueled by rising profit margins, which also reached record highs after the pandemic.

Jul 01 2022

How It Is, And Isn’t, Like Y2K

  • Jul 1, 2022

The 2022 economic backdrop is nothing like the near-Goldilocks environment accompanying the first few innings of the Y2K Tech bust. However, the action to-date in the former Growth stock leaders has followed the 2000-2002 path very closely—and almost on a point-for-point basis, when it comes to some  indexes. With the stock market “weight of the evidence” still negative, we wouldn’t be surprised if the Y2K analog holds for a while longer.

Jun 24 2022

If Inflation Has Peaked, Thank The Stock Market—Not The Fed

  • Jun 24, 2022

High inflation continues to dominate the headlines, but it is only one piece of the “weight of the evidence” that’s stacked against the stock market. Still, in ironic fashion, stock-market action itself suggests that inflation is set to peak.

 

May 13 2022

Some Perspective For Dip Buyers

  • May 13, 2022

Losses in the Russell 2000 Growth Index and the NYFANG+ Index have topped 40%, and the only true equity rockstar, spawned by a 13-year secular bull market, has watched her fund’s value drop by more than three-quarters. Yet there’s still a televised debate as to whether this decline is even a bear! Could there be a more devious creature on the face of the planet?

 

Apr 22 2022

The “Donut” Might Be Healthier Than You Think

  • Apr 22, 2022

Lent ended last week, allowing Christians to resume the intake of unhealthy foods. But rather than a nice, thick T-Bone steak, we’d suggest sampling one of the few items that’s fattened investors’ accounts in 2022—the Donut!

 

Mar 24 2022

The Bull Visits The Vet

  • Mar 24, 2022

Just after yesterday’s close, we loaded our precocious bull into an SUV and drove to the local veterinary clinic for a two-year checkup.

Our bovine buddy drew some sympathetic stares while we were waiting in the lobby. Noting our bull’s droopy eyelids and gray facial hair, an assistant informed us, “You know, you didn’t actually need to bring him here. We now have a mobile euthanasia service.” We just smiled, and waited for the veterinarian, who is said to be a specialist in this new super-species of bull.

Feb 24 2022

The Market Is Off Its Meds!

  • Feb 24, 2022

Well before the war drums in Eastern Europe began to beat, this stock market correction had already been marching to a different beat. The market’s confusion might be understandable, because—unlike during most of the post-GFC corrections—it has so far failed to “self-medicate!”

A persistent feature of stock market declines in the past 13 years has been that they have typically triggered a simultaneous falloff in bond yields.

Feb 11 2022

4% Club—AAPL Takes On The World

  • Feb 11, 2022

It’s probably about high time that we check in with our past and present members of the esteemed 4% Club. For those of you not familiar with this vignette: back in the day, achieving a 4% weight in the S&P 500 had been a rare feat, occurring only during periods of extreme enthusiasm for technology, conglomerates or oil. The blessing of membership soon turned into a curse, with most taking just a cup of coffee behind the velvet ropes before being thrown to the curb because of dramatic underperformance to the rest of the Index. Our two most recent inductees seem to be following the proper established Club protocol for not lingering at the party too long. The two other members, however, have been receiving their mail at the Club for quite some time.

Feb 03 2022

Active Vs. Passive Return Drivers: Update Through December 2021

  • Feb 3, 2022

Our ongoing research into the relative performance of active vs. passive fund styles reveals that market conditions play a significant role in the active/passive return cycle. Accordingly, we identified a set of metrics that describe the market conditions we believe influence which of the two management styles is more likely to outperform. This note updates our research efforts through December 31, 2021.

Jan 28 2022

Small Caps’ Three-Year Ride To Nowhere

  • Jan 28, 2022

Yesterday, the Russell 2000 closed down 20.9% from its November 8th high, and market bulls have conceded it was “due” for a pullback after a 146% gain off the March-2020 COVID lows.

The Russell’s decline is moderate by the historical high-beta standards of Small Caps. However, this drop—combined with other developments transpiring over the last few years—has produced a shocking result: The Russell 2000 is now unchanged on an inflation-adjusted basis since its “Quantitative-Tightening Top” of August 31, 2018. But what a three-year ride it’s been!

Jan 14 2022

Limping Into Wildcard Weekend With A Compound Fracture

  • Jan 14, 2022

We wrote in the latest Green Book that a breadth indicator that should be more well-known than it is—the High/Low Logic Index (or HLLI)—had moved to “maximum negative” right at the cycle high in the NASDAQ Composite on November 19th. Specifically, the 10-week moving average of this indicator showed a perilous internal condition in which too many NASDAQ stocks were reaching 52-week New Highs and New Lows simultaneously. That’s the very definition of a “fractured” market, and has preceded some important NASDAQ declines. There have also been a couple of premature warnings, as in the summers of 1996 and 2019.

 

Dec 30 2021

2022 Earnings: Place Your Bets

  • Dec 30, 2021

It’s once again that time of year for what our founder deemed the great “thermal pollution.” Market pundits and prognosticators will divine, guess, and predict all that the market will bring in the new year.

Dec 23 2021

Can Santa Cap-Off A Stellar Year?

  • Dec 23, 2021

The S&P 500 is flirting with new all-time highs, and the news gets even better for followers of seasonal patterns: The Santa Claus rally has yet to officially begin!