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

Aug 05 2022

Overheated?

  • Aug 5, 2022

Living in Minneapolis, we’re bewildered by the absence of research considering global warming as potentially a good thing for certain organisms. That’s especially true for creatures where the science is almost nonexistent—like the stock market. Record heat wave? Bring it on!

Aug 05 2022

“Toro Nuevo” Or Mirage?

  • Aug 5, 2022

While our breadth measures do not consider this rally to be thrust-worthy, when based on nothing more than performance, it’s difficult to distinguish between the “first up-leg” in a new bull market and a bear-market rally. The vital signs at present appear to be more in-line with the latter (although making that conclusion based on price action, alone, is hardly better than a coin toss).

Aug 05 2022

Bear Market Rallies In Context

  • Aug 5, 2022

The 2022 bear market is the 13th cyclical bear since 1950, and it’s already joined the mightiest half of its predecessors based on the fact that it’s actually contained a bear-market rally. Six of the prior 12 bear markets weren’t interrupted by even one rally of at least 10%.

Aug 05 2022

LEI On The Precipice

  • Aug 5, 2022

The LEI’s 3.6% six-month annualized loss through September 2006 was the largest decline not followed almost immediately by a recession. This year, the LEI contracted by 3.7% over the six months through June—if a recession is avoided in the current experience, it would be the most misleading signal in the history of the LEI as currently constructed.

Aug 05 2022

The Yield Curve: Two “Perfect Records” At Stake

  • Aug 5, 2022

Yield curve action is getting harder to dismiss by the day. But which curve is the most relevant? We tried to answer that question in disciplined fashion in April. To our surprise, the “2s10s” spread that’s ubiquitous in bond-land scored near the bottom of the pack.

Aug 05 2022

Job Market Suddenly “Laboring”

  • Aug 5, 2022

We cringe when we hear the Treasury Secretary or a regional Fed bank president dismiss the possibility of recession on the basis of “low unemployment and strong job gains.” Those measures are as “laggy” as any economic statistics the government publishes.

Aug 05 2022

Valuations: Living Beyond One’s Means?

  • Aug 5, 2022

We won’t dispute that investors were not genuinely frightened at the June market lows, or that fears have evaporated following a 13% rally in the S&P 500. The distress is understandable: For 26 traumatizing days in 2022, our S&P 500 Normalized P/E multiple traded below its 1957-to-date top decile!

Aug 05 2022

Confidence Cracking?

  • Aug 5, 2022

The theory of “contrary opinion” is important to market analysis, but so is an understanding of its limitations. When investor-sentiment surveys dipped sharply in late January, we warned that the declines (which are usually signals to “buy”) might instead mark the beginning of an important trend change. 

Aug 05 2022

The Rally: Impressive, But Not Yet “Thrust-Worthy”

  • Aug 5, 2022

Many technicians contend that the rebound off June’s lows triggered a bear-market-killing “breadth thrust.” Several gauges we monitor to capture this phenomenon contradict that claim. None has reached a threshold that is extreme enough to qualify as a thrust.

Aug 05 2022

Multi-Asset: Winning By Losing Less

  • Aug 5, 2022

At the beginning of the year, we liked the chances for the “Donut Portfolio” to break its 10-year losing streak against the S&P 500. As a refresher, the Donut holds six of seven key assets in equal weights. The S&P 500 is excluded—a decision probably only suitable for allocators who are self-employed. 

Jul 08 2022

Break Out The Checkbook!

  • Jul 8, 2022

We apologize for that terribly misleading teaser of a title, but the bills for the stock-market mania of 2020-2021 are piling up. Inflation is one of them, lately increasing each month as relentlessly as cable TV used to. And for the 10% of households who own 90% of the stocks, market air-pockets such as June’s are like “surprise” medical bills: There’s rarely just one

Jul 08 2022

More Signs Of Peak Inflation

  • Jul 8, 2022

As suggested in our June 24th, Chart of the Week, the peak in consumer inflation (+8.6% in May) has likely either occurred or is imminent. Consumers should thank the stock market, which in 2022 has taken up its occasional role as inflation-fighter after the Fed abdicated throughout 2021.

Jul 08 2022

Looking “Bustier?”

  • Jul 8, 2022

Key indicators are indeed trending in “pre-recessionary” fashion. Among them is the ISM New Orders Index, which dipped into contraction territory in June while inventories increased. Others are the JOLTS that shows a strong (but weakening) labor market, and unemployment claims—which have ticked up.

Jul 11 2022

A Morsel For The Bulls

  • Jul 11, 2022

The MTI’s Technical category is still decisively negative at -3, but some of its shorter-term “counter-trend” components look intriguing for the first time in 2022’s entire decline.

Jul 08 2022

“Recessionary” Valuations?

  • Jul 8, 2022

The bear was a mere cub back in March when we examined the historical record of buying S&P 500 dips in the -10% to -12% range. “Blindly” buying them turned out to have mediocre returns, but we illustrated that the positions of various business-cycle indicators could help one determine whether or not catching the proverbial “falling knife” was warranted.

Jul 08 2022

Down—But Not Washed Out

  • Jul 8, 2022

Based on a short-term perspective, stocks may be ripe for a bounce. However, the S&P 500 has not reached “oversold” territory since early 2016, and it is still a long way from doing so. Of the major indexes, only the Russell 2000 is now positioning to soon claim a “low-risk buy” signal. 

Jul 08 2022

How It Is—And Isn’t—Like Y2K

  • Jul 8, 2022

We previously promised to limit the amount of comparisons to Y2K, but the paths that a number of the usual suspects are taking look more and more like “something we’ve seen before”—in some cases down to the percentage point.

Jul 08 2022

Time Cycles Got It Right; What Do They Say Now?

  • Jul 8, 2022

The enormity of the preceding mania and its vicious unwind have us believing the current bear could unfold over a much lengthier time than is typical. But a combo of time cycles suggests a major low is due any time.

Jul 08 2022

Remember When?

  • Jul 8, 2022

Remember the good old days (like even a year ago) when one didn’t need to mentally tabulate investment results in inflation-adjusted terms? For a blissful couple of decades, nominal and real returns were so close together that the latter figure seemed irrelevant.

Jul 08 2022

Sentimental Musings

  • Jul 8, 2022

Most sentiment measures show none of the frothiness that lingered in the months after the Y2K Tech bust. Rather, some exhibit actions reminiscent of early 2008.