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

Feb 07 2019

A High-Risk Rally

  • Feb 7, 2019

During the market bounce over the last few weeks, we reminded ourselves and others of the old maxim that “bear market rallies look better than the real thing.” Evidently, the stock market overheard us and took the advice as marching orders.
 

Feb 07 2019

Did The Doves Swoop In And Save The Day?

  • Feb 7, 2019

Just a few months ago, Fed Chairman Jerome Powell boasted a reputation as a straight-talking, sound-money banker.

Feb 07 2019

It Wasn’t Powell Who Panicked

  • Feb 7, 2019

The Fed’s “Christmas capitulation” seems to get most of the credit for the stock market rebound, but we’re not exactly sure how, or even if, the Fed capitulated at all.

Feb 07 2019

Credit Conundrum

  • Feb 7, 2019

The stock market seems to have concluded that a recession will be averted in 2019, but evidence from other asset markets is less convincing.

Feb 07 2019

What Are Bonds Telling Us?

  • Feb 7, 2019

Corporate bonds aren’t the only asset reluctant to embrace the stock market’s latest “all clear” verdict on the 2019 economy.

Feb 07 2019

1998 Parallels

  • Feb 7, 2019

There are enough parallels between the 1998 and 2018 market declines that we decided to flesh out the comparison a bit more.

Feb 07 2019

Trend-Following Travails

  • Feb 7, 2019

To recap our allocation moves over the last year: We established an initial equity hedge in tactical accounts very close to the January 2018 highs.

Feb 07 2019

New Year, Old Leadership

  • Feb 7, 2019

We’ve written at length about a bear market’s tendency to catalyze major leadership changes—across sectors, styles, and even geographies.

Feb 07 2019

Sifting Through The Commodity Carnage

  • Feb 7, 2019

Commodities were the worst performer among the major asset classes during 2018, with the S&P/Goldman Sachs Commodity Index losing 13.8% on a total return basis.

Feb 07 2019

Are New Lows The Key To New Highs?

  • Feb 7, 2019

Last year’s market decline was one of the largest to have occurred without a lengthy-preceding period in which breadth narrowed and Small Caps significantly underperformed.

Jan 08 2019

The Line Of Least Resistance Is Lower

  • Jan 8, 2019

At some point in his career, famed stock trader Jesse Livermore ceased using the terms bull and bear,  opting instead to describe trends in terms of “lines of least resistance.”

Jan 08 2019

Is The “Star” Aligned For 2019?

  • Jan 8, 2019

For those who remain skeptical that more stock market troubles lay ahead, we’ve supplemented the MTI and our other market tools with something truly authoritative: Evidence from a gossip column in a 1958 issue The Minneapolis Star!

Jan 08 2019

About That Great Jobs Report...

  • Jan 8, 2019

The December employment report temporarily eased fears of a severe U.S. slowdown. That’s a mystery to us.

Jan 08 2019

The Market Is Off Its Meds!

  • Jan 8, 2019

While investors obsess over the market level at which a hypothetical “Powell Put” might come into play (or whether such a put even exists), they seem to have overlooked the absence of another such put that proved dependable throughout the cyclical bull market.

Jan 08 2019

Yields Might Be Throwing A Curve

  • Jan 8, 2019

While the number of recession forecasts is on the rise, there’s a general reluctance among economists to project a downturn in the absence of a yield curve inversion.

Jan 08 2019

The Fed Was Not The Only One To Tighten Last Month

  • Jan 8, 2019

Wage inflation should accelerate in the months ahead, oil could bounce from its oversold low, and college textbooks might double in price before the fall semester. No problem…

Jan 08 2019

December’s Low Didn’t Have The “Right Look”

  • Jan 8, 2019

As the market sunk to a 3% loss on Christmas Eve, we sensed genuine investor panic—at least among the fraction of investors then paying attention.

Jan 08 2019

Watching For An Internal Washout

  • Jan 8, 2019

Having monitored market internals for warning signs for longer than we care to admit, it’s refreshing to turn around and watch many of the same signals for… wait for it... BUY signals!

Jan 08 2019

You Call That A Panic?

  • Jan 8, 2019

Christmas Eve came not with snowfall but a market freefall which was the worst-ever recorded for that date.

Jan 08 2019

Guess-timating The Downside

  • Jan 8, 2019

While our market disciplines remain negative, we certainly aren’t oblivious to the haircut in equity valuations that’s already occurred.

Jan 08 2019

“De-Worsification” Ruled In 2018!

  • Jan 8, 2019

The market difficulties of 2018 were hardly limited to stocks. Commodities, in fact, were the worst performer among the seven major asset classes.

Jan 08 2019

Read This Before Taking The “Plunge”

  • Jan 8, 2019

After a bad market year like 2018, there’s a natural instinct for allocators to skew portfolios toward assets with poor recent performance. History suggests, though, that one shouldn’t make a habit of buying an asset on the basis of price weakness alone.

Jan 08 2019

Bridesmaid Strategy - Asset Classes

  • Jan 8, 2019

The best we can say about last year’s Bridesmaid asset—the S&P 500—is that it did not underperform “the S&P 500.”

Jan 08 2019

Bridesmaid Strategy - Sectors

  • Jan 8, 2019

Our analysis of the Bridesmaid effect originated in 2006, but was based on S&P 500 sectors rather than asset classes.

Jan 08 2019

Bridesmaid Strategy - Valuations

  • Jan 8, 2019

Momentum strategies aren’t for everyone. Still, contrarians should recognize that buying the prior year’s worst performing sector for a one-year hold has been an underperforming proposition over the long term.

Jan 07 2019

Industry Group Dreams And Nightmares

  • Jan 7, 2019

The “Dreams” portfolio represents a simple industry group trend-following approach, while the “Nightmares” portfolio serves as a bottom-fishing strategy made up of the previous year’s biggest losers.

Jan 08 2019

Corporate Executives Might Be Peeking Into Quants’ Toolkits

  • Jan 8, 2019

In terms of long-term planning, corporate executives are often tasked with choosing between expanding their business or returning cash as a way to reward shareholders. In the quant world, the two decisions have a consequence on future stock returns.

Dec 07 2018

Bull Pause, Or Bear Paws?

  • Dec 7, 2018

The old maxim says that when the bears have Thanksgiving, the bulls have Christmas.

Dec 07 2018

Stock Market Observations

  • Dec 7, 2018

The tops of 1990, 2000, and 2007 were all better “telegraphed” by the action of the market itself, than the September 2018 peak, but secondary measures of market internals suggested all summer that the internal trend was in fact deteriorating—and so did the action in low-grade corporate bonds.

Dec 07 2018

It’s Not A Pause… It’s “Paws”

  • Dec 7, 2018

A bear market will almost always prove to be the catalyst of one or more shifts in long-term market leadership.

Dec 07 2018

It’s About Money, Not Profits

  • Dec 7, 2018

The consensus focus all year has been on the boom in U.S. corporate profits.

Dec 07 2018

Economic Stocking Stuffers

  • Dec 7, 2018

While the monetary and liquidity backdrop has deteriorated all year, the shorter-term economic evidence has remained mixed.

Dec 07 2018

VLT = Very Lousy Timing?

  • Dec 7, 2018

In the spirit of keeping an open mind, three months ago we observed that our S&P 500 VLT Momentum measure had triggered a “moderate-risk” BUY signal with its August reading.

Dec 07 2018

Low Vol For All Seasons?

  • Dec 7, 2018

The S&P 500 Low Volatility Index has performed so well for so long that the ETF based on the index has amassed more than $8 billion.

Dec 07 2018

The Downside Leaders Look Familiar

  • Dec 7, 2018

It wouldn’t be a December Green Book without at least one page of hand-wringing over the year’s extreme underperformance of foreign stocks.

Dec 07 2018

Deep-Six The “Threes-Fives”

  • Dec 7, 2018

We’ve sometimes called the yield curve our “favorite economist,” so we were amused when some enthusiastic data miner in the Treasury market tried to slip us a cheap imitation in late November.

Dec 07 2018

They Can’t Tax What’s Not Earned

  • Dec 7, 2018

With three quarters of a sharply lower corporate tax rate on the books, the median four-quarter trailing profit margin for both the S&P 500 and S&P MidCap 400 jumped to all-time records in the third quarter.

Dec 07 2018

Earnings Releases Cause Surge In Price Volatility

  • Dec 7, 2018

Three years ago, we did a series of studies looking at price reactions to corporate earnings releases (ER) and we found that, since 2007, price movement has become more dramatic on ER days.

Dec 07 2018

Time To Hide In Quality?

  • Dec 7, 2018

Although both High Quality and Low Quality stocks suffered in the last two months’ market turmoil, we are not surprised to see that, on a relative basis, High Quality stocks outperformed Low Quality.

Nov 07 2018

Warning Crack

  • Nov 7, 2018

We wrote in October’s Green Book that “many once reliable seasonal market patterns have been out of sync in recent years.”