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

Jul 05 2019

Mid-Year Mea Culpa

  • Jul 5, 2019

The S&P 500 has rallied 9.2% in the 22 trading days since its June 3rd low, but the move hasn’t (yet) been enough to lift the Major Trend Index out of its negative zone.

Jul 05 2019

Recession Evidence: How Much Is Enough?

  • Jul 5, 2019

Over a 12-month horizon, we now believe a U.S. recession is very likely, but aren’t confident enough to make the call when the forecast window is cut in half. Second-half stock returns could be decent if the business-cycle peak is still a year away. Then again, there’s peril in waiting for “too much” confirmation of recession.

Jul 05 2019

Breadth: Is It Different This Time?

  • Jul 5, 2019

The granddaddy of all technical indicators—the NYSE Daily Advance/Decline Line—continues to make new highs alongside the S&P 500, suggesting the market should move to even higher (but perhaps narrower) highs well into the fall. As noted a month ago, we increasingly suspect that granddaddy may be telling a lie.

Jul 05 2019

Big Is Still Beautiful

  • Jul 5, 2019

The 10-year-old bull grabs most of the headlines, but its younger sibling has begun to command more respect.

Jul 05 2019

Reliving ‘99... Tick By Tick

  • Jul 5, 2019

Current leadership trends continue to track their 1998-99 behavior in an almost eerie fashion—so much so that we now wish we’d used that historical period as our instruction manual!

Jul 05 2019

Building The Wall?

  • Jul 5, 2019

One of the more impressive feats that bullish pundits have pulled off is their successful portrayal of themselves as lonely and misunderstand contrarians even as the eleventh year of a cyclical bull market grinds on.

Jul 05 2019

Does BUY Now Mean SELL?

  • Jul 5, 2019

Many technicians consider the 10-month moving-average crossover technique as the gold standard among long-term timing practices. The method was successfully applied to several asset classes in the SSRN’s most-downloaded paper of all time, “A Quantitative Approach To Asset Allocation” by Meb Faber.

Jul 05 2019

Correlations Are Worthless, Except This One

  • Jul 5, 2019

We’ve never understood investment quants’ desire to project correlations among assets. Such correlations are inherently unstable.

Jul 03 2019

Return Implications Of Dividend Cuts

  • Jul 3, 2019

Last month we noted that current interest-rate expectations might indicate good timing for dividend investments; however, we strongly suggested being selective, and lean toward high-quality dividend payers.

Jun 07 2019

Still Tracing Out A Top

  • Jun 7, 2019

Major market tops are drawn-out processes that can prove costly, and infuriating, to bulls and bears alike. Younger readers might be surprised to know that was true before Twitter.

Jun 07 2019

Stock Market Observations

  • Jun 7, 2019

It’s telling that the stock market rally off of the Christmas Eve lows—impressive as it was (and, for some investors, painful)—did not manage to lift the Major Trend Index beyond its neutral zone.

Jun 07 2019

“Granddaddy” Tells A Lie

  • Jun 7, 2019

Based on the “granddaddy” of all technical indicators—the daily advance/decline line—we wouldn’t normally be worried that the April 30th high in the S&P 500 could be the final high of the bull market.

Jun 07 2019

Take A Closer Look At “Goldilocks”

  • Jun 7, 2019

We’ve frequently written of the uncanny parallels between the rallies of 2018-19 and 1998-99, but hope that newer readers don’t mistake this analysis as a forecast.

Jun 07 2019

Profits Have Peaked

  • Jun 7, 2019

With the S&P 500 EPS count steadily shrinking and managers getting ever more creative with “adjusted EPS,” corporate profits measured with standardized accounting rules merit a closer look.

Jun 07 2019

Allocation Implications Of Full Employment

  • Jun 7, 2019

While the economy’s move above its full-employment level carries reliably negative implications for profit margins, the impact on equity returns has varied greatly from cycle to cycle.

Jun 07 2019

The Small Cap Discount Deepens

  • Jun 7, 2019

Small Caps typically underperform during a bull market’s final phase, and our findings with respect to the Output Gap aid our understanding of that phenomenon.

Jun 07 2019

Bust To Boom, And Back Again

  • Jun 7, 2019

Last month, we observed that crude oil was the only item propping up broad-based commodity indexes, and that something was bound to give with the U.S. dollar pushing to new highs.

Jun 07 2019

Portraits Of An Out-Of-Sync Market

  • Jun 7, 2019

We suggested many years ago that the final top to this historic bull market would be a long and complicated process rather than a clean and singular event.

Jun 07 2019

Trend: The New Contrary Indicator?

  • Jun 7, 2019

Last month’s market action negated the month-old VLT BUY signals for the MSCI EAFE and Emerging Market indexes.

Jun 07 2019

Time For Dividend Stocks, But Stick With Quality

  • Jun 7, 2019

With multiple indicators flashing signs of an economic slowdown amid trade war uncertainty, investors are betting that an interest rate cut is on the horizon.

May 07 2019

Tariff Man Tampers With Toppy Market

  • May 7, 2019

Beware of those who write about stock market history, especially when they speak of cause and effect. The truth is that the “why” can never be known.

May 07 2019

Divergence, Danger, And Delusion

  • May 7, 2019

The U.S. economy and blue chips have shrugged off the risk of the worst trade war since 1930’s Smoot-Hawley Act, while comparatively few stocks on either the NASDAQ or the NYSE have broken out to 52-week highs. There’s also the troubling talk of the Fed having tamed “the cycle.” Should investors bet on a potentially wild (but narrower) final melt-up over the next 6-12 months? We don’t like the odds.

May 07 2019

Adding EM On A Rent-To-Own Basis

  • May 7, 2019

The Major Trend Index has remained in neutral territory during the last several weeks of upside action, suggesting there remain significant fundamental and technical shortcomings beneath it all. But this precarious MTI stance didn’t preclude us from acting on a new bullish reading for Emerging Market equities at the end of April.
 

May 07 2019

Rally Like It’s 1999

  • May 7, 2019

Similarities between 2019’s YTD up-move and the late-2018 recovery are so striking they must make even the most vociferous bear queasy. The trends are identical, but the magnitude of both the absolute and relative performance movements was greater in the earlier experience.

May 07 2019

Bull Markets Are In The Eye Of The Beholder

  • May 7, 2019

The market’s four-month recovery from the brink of a bear was completed in April, and the ten-year-old bull looks better than ever against all of its post-World War II competitors.

May 07 2019

Mixed Monetary Messages

  • May 7, 2019

Confidence in the U.S. economy’s health reached a new peak with the April employment report, with a blowout number for nonfarm payroll coinciding with a soft wage print.

May 07 2019

It’s A Confidence Game

  • May 7, 2019

U.S. stock funds have seen heavy outflows despite the market’s YTD gains of 15-20%, once again reviving the tired characterization of this bull market as the “most hated in history.”

May 07 2019

Commodity Stocks: More Of The Same

  • May 7, 2019

Someone forgot to tell commodity trades this is an era of diversity of inclusivity: This year’s leap in the S&P/Goldman Sachs Commodity Index has been entirely the result of its heavily-weighted energy inputs.

May 07 2019

AANA: The Good And The Bad

  • May 7, 2019

Large Cap U.S. Technology has been the place to be this year, but even an “unmanaged” portfolio with a variety of assets has fared well so far in 2019.

May 07 2019

Where Are Yields Headed? Look In The Mirror!

  • May 7, 2019

Many economists believe U.S. economic growth will reaccelerate in the second half, sending 10-year Treasury bond yields back above 3% late in the year. A forecasting technique with an excellent record, however, suggests the return to 3% won’t occur until late next decade!

May 07 2019

Sell *Beta* In May

  • May 7, 2019

The six-month stretch beginning in May generally coincides with a narrow stock market in which non-cyclical and low volatility stocks tend to be the winners. Hence, don’t “sell” in May, but rather, tilt away from beta and away from “breadth.” These seasonal switching strategies have 70% batting averages.

May 06 2019

Bank Loan CEFs: Double Leverage Implies Higher Risk

  • May 6, 2019

In prior publications we’ve written about corporate leverage, which has risen to an alarming level, and we’re concerned that this could be a trigger for the next market downturn.

Apr 05 2019

1999 Redux

  • Apr 5, 2019

As the market rebound has extended, we’ve noted its striking similarities with the rally of 1999—one that might have been the most speculative in U.S. history.

Apr 05 2019

A Confidence Game

  • Apr 5, 2019

Several consumer confidence gauges plunged in the wake of the Q4 market decline (as expected), and then rebounded in a lagged response to the stock market recovery (again, as expected). But March saw the largest one-month drop in consumers’ assessment of their “Present Situation” since 2008.

Apr 05 2019

BAA Yields: The Baaaad And The Good!

  • Apr 5, 2019

Last fall, we repeatedly noted that low grade corporate credits—measured by Moody’s BAA bond yields—were behaving, well, baaadly.

Apr 05 2019

Inveighing Against The Inversion

  • Apr 5, 2019

Some recent headlines are word-for-word regurgitations of those published in response to the early-2006 yield curve inversion. In that case, the naysayers were temporarily correct, as both the U.S. economy and stock market pushed higher for another year and a half before rolling over.

Apr 05 2019

The P/E Decline Has Been Greatly Exaggerated

  • Apr 5, 2019

The S&P 500 has bounced back to levels seen at the January 2018 spike high, yet is valued more cheaply than it was 14 months ago.

Apr 05 2019

The “Breakout” And Its Aftermath

  • Apr 5, 2019

A common criticism of our long-term valuation work is that valuations shifted north into a new trading range during the 1990s, meaning Leuthold’s benchmarks (dating back to 1957 and earlier) are no longer relevant.

Apr 05 2019

The Cyclical Bull In Perspective

  • Apr 5, 2019

This ten-year boom—one that’s taken the S&P 500 to the second-highest valuations in history—has merely lifted the index to the top end of a channel that’s contained the S&P 500’s 6% annualized gain over the last nine decades.

Apr 05 2019

Bottom-Spotting In Foreign Stocks

  • Apr 5, 2019

The tale of two markets has existed for years, but now it’s getting ridiculous.