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

Nov 06 2020

Remembering Trump

  • Nov 6, 2020

Donald Trump will be remembered as the most polarizing political figure in U.S. history, but he was an unwitting consensus-builder on an issue that was long thought to be “settled science.”

Nov 06 2020

Don’t Overplay The Election

  • Nov 6, 2020

The lack of a “Blue Wave” doesn’t undermine our belief that a big stock market rotation is underway. The valuation gap between Large Cap Growth and other U.S. (and foreign) market segments is so large that it’s become unsustainable.

Nov 06 2020

Liquidity: As Good As It Gets?

  • Nov 6, 2020

Stock market manias thrive on buzzwords, and if there’s a single one that captured the essence of the late 1990s’ boom it was “productivity.” In today’s version, our top candidate is “liquidity”—and we doubt anyone would argue.

Nov 06 2020

Small Value Or Small Growth? Yes!

  • Nov 6, 2020

If there’s an emerging bubble in Growth stock investing, it certainly doesn’t apply to Small Caps. The “usual” premium for Growth over Value within the Small Cap space is nonexistent—both segments look historically cheap.

Nov 06 2020

VLT’s Struggles Are Telling Us Something

  • Nov 6, 2020

Our Very Long Term (VLT) Momentum algorithm has been a very good “confirmatory” market tool over the years, especially at the onset of a new cyclical bull market. But VLT has proven to be of little to no value in navigating this year’s gyrations. VLT’s latest flip-flops reinforce our view that the market leaderboard is set to be rearranged.

Nov 06 2020

Tough Times For Allocators

  • Nov 6, 2020

Diversified, multi-asset portfolios have been weak performers for many years. The ultra-flexible, macro hedge-fund manager represents one extreme of the asset allocation continuum. At the other extreme would be the passive holder of multiple asset classes. It’s been a tough three years for this breed, too.

Nov 06 2020

Time For EM Stocks?

  • Nov 6, 2020

On the basis of both Normalized P/E and Price/Book, there’s plenty of runway for EM stocks if they get back to even the midpoint of their 20-year valuation range. Rising commodity prices and a weak dollar would obviously help, and we expect both in the year ahead.

Nov 06 2020

Miscellaneous Musings On Inflation

  • Nov 6, 2020

We’re still coming to grips with Modern Monetary Theory and the stark realization that “the delusional is no longer marginal.”

Nov 06 2020

Energy: Still Too Early

  • Nov 6, 2020

Fundamentally, we don’t have much new to say on the disaster that Energy-sector equities have become. Mostly, we want to illustrate the danger of assuming that the stocks of commodity producers will necessarily follow the path of their underlying commodities.

Nov 05 2020

SPACs: More Analysis Of Past Deals

  • Nov 5, 2020

Last month, we briefly discussed a burgeoning investment vehicle—Special Purpose Acquisition Companies (SPACs), also known as “blank-check companies.” Since the sole purpose of a blank-check company is to find an operating business to merge with, and subsequently bring it public, the best method to gain some understanding about the outcome of these relationships is to look at past deals.

Oct 07 2020

The New FOMO

  • Oct 7, 2020

“Bull markets climb a wall of worry,” the old saying goes. We’ve heard that piece of wisdom (or imagined we heard it) every week since early summer. But we doubt it was meant to apply to today, when the paralyzing fear is not of potential loss, but of foregone upside (i.e., fear of missing out, or FOMO).

Oct 07 2020

A Fast Start Comes At A Big Price

  • Oct 7, 2020

The first up-leg of the bull market has catapulted many Large Cap valuations to levels seen only in 1999, 2000, 2019, and pre-pandemic 2020. At the six-month point on September 23rd, the S&P 500 P/E on 5-Yr. Normalized EPS had already reached 26.9x—a reading that is 30% higher than at the same point of any other bull market.

Oct 07 2020

Inflation In The Wrong Places?

  • Oct 7, 2020

Long before policymakers’ extreme response to the COVID collapse, we feared that the Fed’s interventions were suppressing important signals from the stock and bond markets. But we now suspect that hyper-expansionary policies are suppressing price signals from the “real” economy as well.

Oct 07 2020

The Valuation Case For “SMIDs”

  • Oct 7, 2020

Mid and Small Cap stocks underperformed in 2018 and 2019. However, after the collapse of February and March, these “SMID” Caps have largely kept pace with the torrid rebound in the blue chips. Today’s valuations are priming the SMIDs for a similar “decoupling” in the years ahead, like that following Y2K.

Oct 07 2020

The Use And Abuse Of Corporate Debt

  • Oct 7, 2020

U.S. corporations piled on almost $1 trillion in debt over the first six months of the year (a 10% increase). Corporate debt has now surged to 56% of GDP. We’ve argued that the level of corporate debt isn’t the problem, in and of itself. Rather, it’s what this debt has failed to generate that is the real problem.

Oct 07 2020

Remember The Yield Curve?

  • Oct 7, 2020

It would be a mistake to ignore (as most pundits will) this important forecasting tool until the next time it threatens to invert. The level and direction of the yield curve provide helpful information throughout the entire economic cycle.

Oct 07 2020

Tech Mania 2.0 Doesn’t Quite Measure Up

  • Oct 7, 2020

In the 24 months leading up to its early-September peak, the S&P 500 Technology sector gained 68%. By comparison, the two-year S&P 500 Technology gain going into its March-2000 peak was 203%. The S&P SmallCap 600 Technology Index doubled in the 23 months leading into the early-2000 top versus the two-year gain of just 6% at its 2020-summer peak.

Oct 07 2020

Homebuilders: The Weird And Unexpected

  • Oct 7, 2020

Like many years, 2020 is one in which an investor who was armed with a perfect economic forecast would have been befuddled by stock market action. Who would have imagined that passive equity investors (including many posing as Wall Street strategists) would be so well-rewarded for ignoring the economic downturn?  

Oct 07 2020

Five Reasons To Expect Higher Yields

  • Oct 7, 2020

Much of what we think “we know” about the bond market says yields should be headed higher.

Oct 06 2020

SPACs: Fashion Or Fad?

  • Oct 6, 2020

Special Purpose Acquisition Companies (SPACs) have become increasingly popular of late. We ask a seemingly simple question: “How do companies fare following a SPAC merger?”