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

Mar 05 2021

Bureaucratic Bull

  • Mar 5, 2021

Twenty-one years ago, the bullish bets were on publicly-traded businesses (especially ones with dot-coms after their names). In contrast, today’s bulls seem more beguiled by bureaucrats—the central bankers who, having saved markets and the economy from catastrophe in the last year, are assumed to have mastered the business cycle.

Mar 05 2021

Ruminations On The Fed, Past And Present

  • Mar 5, 2021

If the “Maestro’s” image was dinged from being the “original bubble-blower,” imagine what will happen to Jay Powell’s if stock valuations mean-revert alongside interest rates and inflation over the next few years.

Mar 05 2021

More On The “Rate-of-Change” In Rates…

  • Mar 5, 2021

The liquidity and interest-rate backdrop for stocks has been favorable to such an extreme that we’ve cautioned any minor diminution in this condition could trip up the stock market. On that score, the monetary aggregates and the Fed’s balance sheet don’t pose much concern. On the other hand...

Mar 05 2021

Higher Prices Shouldn’t “Surprise” Us

  • Mar 5, 2021

The Fed has communicated it’s inflation target in uncharacteristically-plain English. Maybe they need to dumb it down more, because it’s the investors in English-speaking countries who have been the most surprised by the recent pickup in the inflation numbers!

Mar 05 2021

NOPE And NOPE!

  • Mar 5, 2021

The calendar would say the U.S. economic recovery and bull market are very young, yet there’s an astounding array of “late-cycle” activity occurring on both Main Street and Wall Street. In the manufacturing economy, bottlenecks have reached levels that have historically been troublesome for stocks.

Mar 05 2021

A “New-Era” Look At The Future

  • Mar 5, 2021

Young readers sometimes give us a not-so-subtle roll of the eyes when we discuss any sort of stock market history that occurred before their date of birth, but it takes experience to appreciate that “there’s nothing new under the sun—least of all in the stock market.”

Mar 05 2021

If You Like TINA, You Should Love “SAMARA!”

  • Mar 5, 2021

Equity investors have had a multi-year love affair with TINA—the belief that “There Is No Alternative” to stocks in a world of ridiculously-low interest rates. This TINA romance has carried on so long that the S&P 500 is nearing valuations last seen in the Tech bubble’s final inning. If the fling with TINA has become prohibitively expensive, we’d like to introduce “SAMARA.”

Mar 05 2021

Small Caps: It’s Still Early

  • Mar 5, 2021

Technical analysts continue to be aghast at the relentlessly “overbought” readings generated by Small Cap stock indexes. However, last month we noted that such extremes had previously presented themselves only at the early or middle phases of a Small Cap leadership cycle—never at the end of such cycles.

Mar 05 2021

Bond Yields “Take Down” An Old Favorite

  • Mar 5, 2021

The “lower for longer” interest-rate thesis propped up the S&P 500 Low Volatility Index for more than a decade. Rising bond yields have since helped drive this former darling to an 18-year relative-strength low. Yet, assets in the S&P Low Volatility ETF are still five-times larger than its High-Beta counterpart.

Mar 05 2021

Lever Up!

  • Mar 5, 2021

Someday, we’ll have a chuckle with our (yet unborn) basketball-playing grandson about the time Shaquille O’Neal was able to raise several-hundred-million dollars in his second SPAC. But while these anecdotes get sillier and sillier, we have a personal bias toward speculative activity we can measure over time. That activity isn’t quite as alarming as the anecdotes, but it’s getting there.

Mar 04 2021

Newfound Popularity Of Thematic ETFs

  • Mar 4, 2021

We’ve noticed a small segment of equity ETFs, designated as “thematic,” that is increasingly gaining popularity. Thematic ETFs invest in baskets of stocks that share narrowly-defined business enterprises outside of the standardized GICS methodology.

Feb 05 2021

Silly Season

  • Feb 5, 2021

Move over, Y2K! In late January, the squeeze of popular hedge fund “shorts” eclipsed anything we saw at the peak of the Technology bubble. But who knows? An even wilder event might be in store in coming months.

Feb 05 2021

Early-Cycle “Overheat?”

  • Feb 5, 2021

Equities continue to benefit from an odd combination of faith and doubt in the Federal Reserve: Faith that the “Fed put” under financial markets is struck closer to the price of the “underlying” than ever before, and doubt that limitless liquidity will trigger a dangerous rise in consumer prices. In all fairness, this glass half full assessment is hardly a theoretical one, but one based on years of empirical evidence. 

Feb 05 2021

Normalize This!

  • Feb 5, 2021

The sell-side is at it again, publishing a one-year ahead “Adjusted” EPS figure for the S&P 500 that is unlikely to be achieved—and then affixing P/E multiples seen near an historic market peak to “capitalize” on those unlikely earnings.

Feb 05 2021

Minding The “Middle”

  • Feb 5, 2021

When investors ponder the level of yields that might pose a problem for stocks, it’s invariably the U.S. 10-Yr. Treasury bond that’s referenced. That’s fine, but the middle part of the Treasury curve has had just as strong a relationship with stocks, historically, as have longer-dated bonds.

Feb 05 2021

Climbing The Wall Of Confidence?

  • Feb 5, 2021

Stock market valuations may be considered the ultimate in fundamental measures, but they can just as easily be considered long-wave sentiment indicators. What causes equity investors to pay as little as 10x for S&P 500 Normalized Earnings at one point (March 2009), but pay more than 30x a dozen years later? The Fed printing press was in overdrive at both points; only emotions can account for the difference.

Feb 05 2021

When “Overbought” Is Bullish

  • Feb 5, 2021

The recent months’ surge in Small Caps has been historic, and the Russell 2000 continues to register ridiculously “overbought” readings on many technical oscillators. In the short-term, that might be a cause for caution on the overall market. However (and perhaps counter-intuitively), this extreme strength cements our view that a long-term leadership cycle in Small Caps is underway. 

Feb 05 2021

Stocks In The Face Of Rising Yields

  • Feb 5, 2021

With yields on the 10-Yr. Treasury finally breaking above 1.00% last month, the consensus has quickly evolved to the view that stocks and yields can continue to rise alongside one another for a while. Small Caps have shown a decisive performance edge during the recent episodes.

Feb 05 2021

A Sign It Could Get “Even Sillier”

  • Feb 5, 2021

The January moves in heavily shorted Micro Caps were more bizarre than anything we saw during the wildest days of the Tech bubble. Despite these signs of rampant stock speculation by the retail crowd, we still wouldn’t characterize today’s sentiment backdrop as frenzied as the peak levels of 1999-2000.

Feb 05 2021

How It Bodes For Biden

  • Feb 5, 2021

Early evidence suggests the Biden administration and the newly “purple” Senate will resist the pull of the far-left, at least from an economic perspective. Stock investors are cheering... though in light of their current euphoria, they might as well have celebrated a write-in victory for Ralph Nader alongside Green Party control of the Senate.