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

May 07 2021

Young Bull, Old Threat

  • May 7, 2021

By our count, the current bull market is the 13th of the postwar period. The 88% gain achieved by the S&P 500 in less than 14 months already places this bull sixth in terms of cumulative gains. We considered it a hindrance that this bull commenced from higher valuation levels than any other in history. Instead, they seem to have provided a head-start. 

May 07 2021

Stock Market Observations

  • May 7, 2021

The speculative peak for this market rally may have occurred in either January (when GameStop and other “left for dead” short candidates soared), or February (when indexes tracking the “newborns”—IPOs and SPACs—both peaked). But even if we knew that for certain, a major peak in stock prices could still be months away.

May 07 2021

Sizing Up The Profit Recovery

  • May 7, 2021

We don’t make much use of “Forward” EPS for the S&P 500 because analyst forecasts have tended to be hopelessly optimistic. But if their short-term projections are on target, when numbers for the current quarter are reported, 12-month trailing GAAP EPS will exceed the $139.47 pre-COVID peak.

May 07 2021

New Era Valuations?

  • May 7, 2021

We understand the various rationale for the upward shift in equity valuations seen over the last quarter century or so. Unfortunately, wiping away all market history prior to 1995 does not make stock valuations appear significantly less inflated. 

May 07 2021

How Much Leverage Is Too Much?

  • May 7, 2021

FINRA’s latest report shows a 72% annual gain in margin debt. Yet, in relation to the gain in stock prices, growth in Margin Debt is still well below the peaks of early 2000 and mid-2007—suggesting investors could take on considerably more leverage in the months ahead.

May 07 2021

Inflation Watch

  • May 7, 2021

April ISM readings, both for Manufacturing and Services, were hot across the board. That’s good news for a still-recovering Main Street, but it manifested in ways that have frequently caused problems for a famous Street located in Lower Manhattan.

May 07 2021

The “Tape” Doesn’t Always “Tell All”

  • May 7, 2021

Technicians are collectively bullish because of the absence of any serious internal divergences. But, severe corrections can erupt with little, or no advance warning from a deterioration in breadth and leadership. In fact, the first few years of the last bull market  provided two such examples (mid-2010 and mid-2011). 

May 07 2021

Time For “Timing?”

  • May 7, 2021

Valuations aren’t known as effective timing tools, but they can certainly help one decide when an attempt at timing may be appropriate. And if that time isn’t now, then when?

May 07 2021

Two More Reasons For Yields To Rise

  • May 7, 2021

Bond yields have paused in the last several weeks, but we think it’s likely to be a pause that “refreshes.” Many bond indicators, including the Copper/Gold ratio popularized by Jeffrey Gundlach, suggest yields should be moving dramatically higher in the months ahead.

May 07 2021

“Surprise” Or “No Surprise?”

  • May 7, 2021

Navigating the investment landscape over the past year has been a journey full of surprises. No data other than “earnings surprises” can better demonstrate how unpredictable companies’ financial performance has become. 

Apr 08 2021

Time For A “Donut” Break?

  • Apr 8, 2021

Despite a resurgence in Small Cap stocks and Commodities, it still feels like an “S&P 500 World” for asset allocators. The financial media remain obsessed with S&P 500 targets, S&P 500 earnings, and S&P 500 stocks. And why wouldn’t they be?

Apr 08 2021

Reading The Short-Term Tea Leaves

  • Apr 8, 2021

The stock market’s technical backdrop remains pretty hard to assail, as evidenced by the current +4 reading on the revamped MTI’s Technical category. But there are a few short-term cracks that bear watching. 

Apr 08 2021

Introducing The “New” MTI

  • Apr 8, 2021

We launched a revamped version of our Major Trend Index. The objective of the new methodology is to increase the flexibility, and even the subjectivity of the MTI. This approach recognizes the “subjective reality,” without forcing us into the tedium of re-weighting sub-factors if they become more or less critical as market dynamics evolve.

Apr 08 2021

The “New” MTI Debuts At High Neutral

  • Apr 8, 2021

Read this week's Major Trend.

Apr 08 2021

A Pricey Alternative To The S&P 500?

  • Apr 8, 2021

This month we focus on the valuations of the MSCI USA Index—which is nearly identical to the S&P 500. This is worth following mainly because the folks at MSCI are kind enough to provide us with much longer-term histories of Cash Flow and Book Value Per Share.

Apr 08 2021

EAFE And EM: Long Past Their “Peaks?”

  • Apr 8, 2021

We applied the “Peak Cash Flow” valuation methodology to the EAFE and MSCI Emerging Markets Index and found them both priced at only about one-half of today’s MSCI U.S. multiple. However, the ratios are already above anything achieved during the 2009-2020 global bull market.

Apr 08 2021

Still Heating Up…

  • Apr 8, 2021

The Fed’s reflationary efforts are showing up everywhere except in the measure that’s engineered specifically to minimize them—the Consumer Price Index. It’s a virtuous circle, until it is not

Apr 08 2021

Putting More And More On Margin

  • Apr 8, 2021

In one year, the bull market has persuaded investors to do something they were reluctant to do near the end of an almost eleven-year bull: Lever Up. Year-over-year growth in Margin Debt reached 49% in February and should catapult far above the “conventional” 50% danger threshold with March’s results.

Apr 08 2021

Snack Time?

  • Apr 8, 2021

As discussed elsewhere in this section, we had a novel idea for asset allocators tired of chasing the S&P 500: Hop off the treadmill and take a “Donut” break!

Apr 07 2021

Equity Financing On The Rise In Some Market Segments

  • Apr 7, 2021

With the equity market at all-time highs and abundant liquidity in the economy, it is probably not surprising to see that CEOs are taking note: Equity issuance is on the rise, especially for small-cap companies.