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Inside The Stock Market ...trends, cross-currents, and outlook

Feb 07 2024

Superficial Strength?

  • Feb 7, 2024

The stock market remains “externally” strong, with the S&P 500 and DJIA at new all-time highs on February 2nd.  However, the YTD performance gap between the S&P 500 and the Russell 2000 is already 8%—the worst five-week start ever for Small Caps on a relative basis. And, on a trailing 12-month basis, the percentage of S&P 500 stocks outperforming the index, itself, is the lowest on record at just 25.6%. That’s made it a challenging time for active managers and dart-throwers alike.

Feb 07 2024

Hold Your Horses

  • Feb 7, 2024

The soft-landing camp is growing, but the new members are not offering anything original to support their case. Most believe the yield curve is broken, though many argued the same in both 2007 and 2019. They say households are in good shape, but that is only true for the consolidated consumer balance sheet and it’s the behavior of marginal consumers that’s most critical at turning points.

Feb 07 2024

Circular Logic?

  • Feb 7, 2024

As noted earlier, “Don’t fight the Fed” is an adage that last year’s performance seems to have debunked, although we think it is too early for equity investors to declare victory.

Feb 07 2024

Sizing-Up Small Caps

  • Feb 7, 2024

It’s too soon to know if the October low for small caps will stand, but it would have been a better, more buyable low if it had been accompanied by a recession. It’s all about “initial conditions.” Russell 2000 lows associated with recessions bottomed with a normalized P/E multiple nearly five points below that of the median multiple for non-recessionary lows—and subsequently gained an average of 185% versus +75%.

Feb 07 2024

P/E Multiples Still Matter

  • Feb 7, 2024

Last month’s break in the S&P 500 above its January-2022 high means that we must officially label the rally since October 2022 as a new bull market. This also means we can now say with certainty that the October-2022 low was the priciest bear market bottom in history—and by a long shot.

Feb 07 2024

The Many Flavors Of EPS

  • Feb 7, 2024

Yale professor Robert Shiller popularized the idea of smoothing out earnings for cyclical fluctuations about 25 years ago. However, about 25 years before the famed “Shiller P/E,” Steve Leuthold was charting S&P 500 5-Yr. Normalized EPS by hand. 

Feb 07 2024

January Jobs: Not So Stellar

  • Feb 7, 2024

The jobs numbers are not the first we’d expect to provide evidence of an impending economic turning point, but that is not the view of those in the soft-landing camp. And the most recent “soft” (survey-based) employment numbers have probably contributed to that camp’s swelling membership.

Feb 07 2024

A New January Barometer

  • Feb 7, 2024

The stock market leader in the first month of the new year has an above-average chance of persisting during the remaining eleven months. Historical results showed this to be true, not only for index results, but at various other levels of granularity, including sectors, themes, and asset classes.

Feb 07 2024

Technical Laments

  • Feb 7, 2024

As detailed elsewhere in this section, the notion of an economy with unstoppable momentum is undermined by an historic divergence between real growth estimates (GDI vs. GDP), and by the weakness in full-time jobs and total hours worked.

Jan 06 2024

The Big Fundamental

  • Jan 6, 2024

Remember the nickname for retired San Antonio Spurs star Tim Duncan? “The Big Fundamental.” The stock market itself is a big fundamental—and that’s probably truer now than in past cycles, since market capitalization relative to U.S. GDP is larger today—with the exception being the most extreme phase of the post-COVID mania.

Jan 06 2024

Saved By The Wealth Effect?

  • Jan 6, 2024

The S&P 500’s inflation-adjusted gain over the last twelve months is 21%, far above any previous reading seen on the doorstep of a U.S. recession. In other words, the wealth effect—a major contributor to the 2021-2022 inflationary spiral—is back again.

Jan 06 2024

Consumers Ready To Crack?

  • Jan 6, 2024

There are reports that 40% with student loans did not make an initial payment when installments resumed in October. Meanwhile, among seniors aged 65-79, the share with a mortgage rose to 41% in 2022, up from 24% in 1989, while the percentage of those aged 80+ with a mortgage increased from 3% to 31% during the same time! 

Jan 06 2024

Technicals: Thrusting And Streaking!

  • Jan 6, 2024

The S&P 500 upswing from its October 2022 low reached +34% at the 2023 high point on December 28th. That’s roughly ten percentage points behind the average gain at the same point of the past 15 major advances since 1957.  Still, it’s a solid gain.

Jan 06 2024

How The Rally Stacks Up

  • Jan 6, 2024

After the S&P 500 lost 25.4% into its low in October 2022, the fundamental characteristics surrounding the market at that time were hardly the type that pave the way for a multi-year bull market. We’ve therefore maintained that even the most rabid bulls need to temper their expectations. 

Jan 06 2024

Checking In On “Median” Valuations

  • Jan 6, 2024

The shortfall of 12.7% in the Equal Weighted S&P 500 compared to the Cap-Weighted version was its second-worst annual showing. Thanks to the lagging action, the valuation profile for the average Large Cap stock has improved.

Jan 06 2024

2024 Time Cycles: Less Bullish Than Last Year

  • Jan 6, 2024

There’s a huge difference between having an awareness of the myriad calendar phenomena impacting the stock market, and actually acting on them.

Jan 06 2024

2023 Asset Allocation Review

  • Jan 6, 2024

In the theme that’s reminiscent of all but a couple of the last 15 years, the optimal strategy for equity managers and asset allocators in 2023 was the same: Buy the S&P 500, and then hit the links.

Dec 07 2023

A Holiday Feast?

  • Dec 7, 2023

There’s an old stock market adage that says if the bulls come for Thanksgiving, then the bears will have Christmas. Last month though, Thanksgiving was one of the few days stocks didn’t go up (… but only because the NYSE was closed). No problem. The market found plenty of other November excuses to rally.

Dec 07 2023

Investors “Fight The Fed”—And Win!?

  • Dec 7, 2023

Equities have dodged the impact of this year’s monetary tightening, and Large Cap Growth stocks have once again proved to be the most artful dodgers.

Dec 07 2023

2007 Vibes?

  • Dec 7, 2023

Our Major Trend Index is not an economic forecasting tool. Still, we thought a U.S. recession might be imminent when the MTI dropped into bear territory on October 6th.