Green Book August 2014
Major Trend Index Drops To Neutral In Early August
During the past four weeks, our stock market disciplines have deteriorated and we’ve responded by cutting our tactical accounts’ net equity exposure (via various ETF hedges) to 55% from 65%. The latest 5% reduction was triggered by a decline in the Major Trend Index to a dead “Neutral” reading of 1.00 after calculating the data for the week ended August 1st.
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Featured Articles
Major Trend Index Drops To Neutral In Early August
Net equity exposure in the Core and Global Portfolios trimmed to 55%. Chances are good that any near-term market set-back will be measured in weeks (not months), and contained within the parameters of either a shallow (under 7%) or intermediate (7-12%) correction.
Market Internals—Breadth Weakness Troubling But Not Dire
Remember that peaks in market breadth tend to lead peaks in the S&P 500 by at least a few months.
Are There Better Values Abroad?
The United States’ large P/E premium relative to the rest of the world suggests that foreign equities should produce total returns of about two percentage points (annualized) above the U.S. over a seven to ten-year horizon.
Yield Curve Too Flat? Short Term Maybe, Longer Term Probably Not.
With the Fed policy approaching actual tightening, the market is trying to price in a rate hike in the next year or so. This is a rather typical market response.
A Year Before Tightening - Stocks Will Be Fine
We studied the five previous initial rate hikes and present the average pattern over the one year period prior to these events.
Sector Valuations: A Top-Down Look At Risk & Opportunities – Predicting Relative Returns
Cheapest three sectors on a relative basis: Info Tech, Health Care, Energy
India Equity Investing: How To Best Gain Exposure?
Among EM countries, the Indian equity market has been one of the most difficult corners for international investors to gain access. We look at the market characteristics and investment channel options to consider how to best gain exposure to Indian companies.
Automotive Retail Shines In A Dimming Sector
We examine the highly ranked Automotive Retail group and explain why, despite its recent strength, it may still have room to run.
Table of Contents
Stock Market
- No Time For The Hamptons
- Market Internals—Breadth Weakness Troubling But Not Dire
- Small Cap Premium Finally Shrinks—But Remains Historically Extreme
- Are There Better Values Abroad?
- The Worst Of The “Window” Is Upon Us
- Score One For The “Smart Money”
- Correlation Breakdowns
- Time To Rethink EM?
- Chinese Stocks: Accounting Red Flag Screen
Of Special Interest
Macro Monitor
- US Bonds
- Risk Aversion Index Ticked Up - Still On “Higher Risk” Signal
- A Year Before Tightening - Stocks Will Be Fine
- Yield Curve Too Flat? Short Term Maybe, Longer Term Probably Not.
Equity Strategies
- India Equity Investing: How To Best Gain Exposure?
- Current Attractive & Unattractive Groups and Highlights
- Automotive Retail Shines In A Dimming Sector
- Relative Valuation Group Ranks
Quant
Market Internals
Portfolios
- Core & Global Asset Allocation Portfolios’ Net Equity Exposure Cut to 55% In August
- Long Only Portfolios
- Short Portfolios
Major Trend
Estimating the Downside
At Random
Major Trend Index Drops To Neutral In Early August
Net equity exposure in the Core and Global Portfolios trimmed to 55%. Chances are good that any near-term market set-back will be measured in weeks (not months), and contained within the parameters of either a shallow (under 7%) or intermediate (7-12%) correction.
Market Internals—Breadth Weakness Troubling But Not Dire
Remember that peaks in market breadth tend to lead peaks in the S&P 500 by at least a few months.
Are There Better Values Abroad?
The United States’ large P/E premium relative to the rest of the world suggests that foreign equities should produce total returns of about two percentage points (annualized) above the U.S. over a seven to ten-year horizon.
Yield Curve Too Flat? Short Term Maybe, Longer Term Probably Not.
With the Fed policy approaching actual tightening, the market is trying to price in a rate hike in the next year or so. This is a rather typical market response.
A Year Before Tightening - Stocks Will Be Fine
We studied the five previous initial rate hikes and present the average pattern over the one year period prior to these events.
Sector Valuations: A Top-Down Look At Risk & Opportunities – Predicting Relative Returns
Cheapest three sectors on a relative basis: Info Tech, Health Care, Energy
India Equity Investing: How To Best Gain Exposure?
Among EM countries, the Indian equity market has been one of the most difficult corners for international investors to gain access. We look at the market characteristics and investment channel options to consider how to best gain exposure to Indian companies.
Automotive Retail Shines In A Dimming Sector
We examine the highly ranked Automotive Retail group and explain why, despite its recent strength, it may still have room to run.
Stock Market
- No Time For The Hamptons
- Market Internals—Breadth Weakness Troubling But Not Dire
- Small Cap Premium Finally Shrinks—But Remains Historically Extreme
- Are There Better Values Abroad?
- The Worst Of The “Window” Is Upon Us
- Score One For The “Smart Money”
- Correlation Breakdowns
- Time To Rethink EM?
- Chinese Stocks: Accounting Red Flag Screen
Of Special Interest
Macro Monitor
- US Bonds
- Risk Aversion Index Ticked Up - Still On “Higher Risk” Signal
- A Year Before Tightening - Stocks Will Be Fine
- Yield Curve Too Flat? Short Term Maybe, Longer Term Probably Not.
Equity Strategies
- India Equity Investing: How To Best Gain Exposure?
- Current Attractive & Unattractive Groups and Highlights
- Automotive Retail Shines In A Dimming Sector
- Relative Valuation Group Ranks
Quant
Market Internals
Portfolios
- Core & Global Asset Allocation Portfolios’ Net Equity Exposure Cut to 55% In August
- Long Only Portfolios
- Short Portfolios