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

Sep 08 2021

A Good Thing To Have In Reserve

  • Sep 8, 2021

It seems investors care mostly that the authorities have fiercely defended the S&P 500’s status as the World’s Reserve IndexTM. A decade of QE should have taught us that when the Fed conducts a decade’s worth of QE in little more than a year, U.S. Large Cap stocks benefit the most. 

Sep 08 2021

Reading The Short-Term Tea Leaves

  • Sep 8, 2021

The market’s August push was enough to lift four of the seven lagging bellwethers to new cycle highs. Among the three remaining laggards, only the Dow Jones Transports is still significantly below its high.

Sep 08 2021

Let Us Add To The Bullish Cacophony

  • Sep 8, 2021

It’s been a heck of a stock market year, and there are still four months left. What else could go right? Monetary conditions, for one thing—at least as proxied by our Dow Bond Oscillator (DBO).

Sep 08 2021

The Stock Market IS A “Fundamental”

  • Sep 8, 2021

The impact of U.S. stock-market “hegemony” extends far beyond currency markets. We believe the mania has progressed to the point where the stock market itself will shape the intermediate-term and even long-term fortunes of the U.S. economy more than it ever has before.

Sep 08 2021

Technology Stocks: Dance Like Nobody’s Watching

  • Sep 8, 2021

In the middle of the last decade, we marveled at the Tech sector’s ability to flog the rest of the market quarter after quarter, with no meaningful breakout in valuations. Specifically, the median Price/Cash Flow ratio for S&P 500 Technology managed to “hug” the 15x level for about four years beginning in late 2013. Tech’s post-COVID boom is nothing of the sort.  

Sep 08 2021

What’s Your “Number?”

  • Sep 8, 2021

Those in their peak earning years (40s and 50s) who’ve also enjoyed the stock market’s windfall gains are very likely to have seen their annual expenses climb much higher than the Consumer Price Index over the last several years.

Sep 08 2021

Not Overthinking Small Caps

  • Sep 8, 2021

There are some positive cyclical influences for Small Caps, like higher inflation and deeply negative real interest rates. But in our minds, the valuation spread versus Large Caps is more important. 

Sep 08 2021

A Lost Decade For Emerging Markets

  • Sep 8, 2021

Fading momentum in GDP growth, sizable dislocation of corporate EPS in the midst of an expansion, and U.S.-dollar weakness have all made EM equity investments inferior to U.S. stocks over the last decade. 

Aug 06 2021

Sharing The Punch Bowl?

  • Aug 6, 2021

The gap between YOY growth rates in M2 and nominal GDP just flipped negative after four quarters of record-high readings. In other words, the recovering economy is now drinking from a punch bowl that the stock market once had all to itself. Similar drinking binges occurred in 2010 and 2018, both of which then experienced corrections north of 15%.

Aug 06 2021

Flesh Wounds, Or Something Deeper?

  • Aug 6, 2021

At the August 5th, S&P 500 bull-market high, seven of our eight bellwethers had failed to make a “confirming” high during the prior month of trading—up from six non-confirmations a month ago. “The dog that didn’t bark” (yet) is the S&P 500 Equal Weighted Index. 

Aug 06 2021

NASDAQ Natterings

  • Aug 6, 2021

In the week ended July 23rd, the NASDAQ accomplished a rare feat by closing at a 52-week high at the same time that more of its members were pegging 52-week New Lows than New Highs. That last occurred at the exact NASDAQ high preceding the GFC collapse; there was also a timely warning ahead of the crash of 1987.

Aug 06 2021

A Look At The Small-Cap Setback

  • Aug 6, 2021

The Russell 2000 has blown the 14% lead it had built against the S&P 500 earlier this year, and now trails the index by almost 5%. Has that type of intra-year reversal happened before, and, if so, did it portend a major change in leadership?

Aug 06 2021

Testing The Transports

  • Aug 6, 2021

A new market high that is not confirmed by the stocks of companies that “move the goods” is a warning signal. We reviewed the Transports’ action in all years the S&P 500 accomplished a 12-month high during the month of July, like it did this year.

Aug 06 2021

What If The Valuation Message Turns Out To Be Really Wrong?

  • Aug 6, 2021

Today’s Peak P/E ratio implies the S&P 500’s ten-year-forward annualized total return will be in the range of -3%. If this P/E ratio turns out to be as deceptively pessimistic as it was at its worst point in history, the S&P 500 could produce an annualized nominal total return of about +5% over the next decade. 

Aug 06 2021

The “Rule Of Twenty” Revisited

  • Aug 6, 2021

Pundits could reasonably argue the market has never been more expensive in light of the prevailing rate of inflation. That’s the conclusion of the “Rule of Twenty,” which proposes that the stock market’s P/E ratio and the trailing 12-month Consumer Price Inflation rate should sum up to 20.

Aug 06 2021

Golden Milestone

  • Aug 6, 2021

Fifty years ago this month, Richard Nixon formally suspended the convertibility of U.S. dollars into gold. Editorials commemorating this have tended to have a celebratory tone, and why not? Abandoning the gold standard greatly expanded the arsenals and imaginations of policymakers, both of which have been on historic display over the last 18 months.

Aug 06 2021

Smarter Than The Bond Market?

  • Aug 6, 2021

The half-percentage-point drop in the 10-year Treasury yield, since mid-March, has investors worried about “what the bond market might know” that the stock market doesn’t. Maybe it’s time to stop lionizing the bond market’s prescience and give the stock market its due.

Aug 06 2021

Liquidity Letdown?

  • Aug 6, 2021

Stock market liquidity might seem plentiful, with the Fed still buying $120 billion in bonds per month under the all-too-predictable continuation of what was first billed as an emergency operation. However, the steadiness of QE masks a major second-quarter reversal in “excess liquidity.”

Aug 05 2021

Digging Out Of The Red

  • Aug 5, 2021

An unprecedented number of companies are still deep in the red, even while the economy is shrugging off the impact of the pandemic. Small-cap growth companies are showing no sign of a quick recovery.

Jul 08 2021

Music For The “Mania”

  • Jul 8, 2021

At some point during the June/July streak of seven-consecutive S&P 500 daily-closing highs, an album from 1980 popped into our heads: Nothin’ Matters And What If It Did—released when John Mellencamp was still known as John Cougar. It brought to mind some “nothin’s” that seem not to matter.