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Green Book January 2015

Weight of the evidence suggest bull market has embarked on a broad topping process that could take its time... Another look at Small Cap Valuations based on Relative Price to Book - not so bad... A Winning Year for Leuthold Group Selection Scores, Airlines flew above the crowd... Thoughts On Energy, Is the carnage over?... We are nothing if not contrarians, but have also highlighted the hazards of “knee-jerk” contrarianism...

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Stock Market

Topping Out… But Patience Required

Weight of the evidence suggests the bull market is in a broad topping process, likely begun in late-July. The duration, however, may be proportionate to the tremendous five-plus year upswing that preceded it.

Major Trend

MTI Still Neutral; Caution Advised

We are pleased with our results for 2014, as we averaged about 58% net equity exposure throughout the year and were within throwing distance of the all-equity benchmarks. Our performance run was substantially smoother, though, and earned good risk adjusted returns. We made no substantial changes to our allocation in December.

Of Special Interest

Asset Allocation & Sector Strategy: Follow The Trend, Or Fade It?

We are nothing if not contrarians, but have also highlighted the hazards of “knee-jerk” contrarianism—in which investors are instinctively drawn to the asset, sector, or stock that is down the most in price in the recent past.

Macro Monitor

U.S. Interest Rates And Credits—Expect The Unexpected

We expect much higher volatility in interest rates this year as the market grapples with the prospect and timing of the Fed’s first rate hike.  Our base case is for the Fed to raise rates in the third quarter. There are various reasons for the Fed to be patient. Inflation will be the biggest one.  The threat of oil-related risk contagion is certainly real. We are concerned that equities have not fully priced in this threat.  

Macro Monitor

2015 Time Cycle—Giving The Bull The Benefit Of The Doubt?

We are again impressed by the pattern’s predictive ability as most equity markets tracked their respective patterns quite well in 2014. Another banner year seems to be in store for the S&P 500. The exceptionally favorable pre-election year is the main reason, but we cannot be too complacent.

Stock Market

A Good Year For Leuthold Industry Group Scores

Last year was a solid one for the Group Selection (GS) Score approach, with the Attractive list delivering a total return of +13.1%—more than 500 basis points above The Leuthold Group Universe average, which gained only +7.9%.

Table of Contents

Stock Market

Of Special Interest

Macro Monitor

Equity Strategies

Market Internals

Portfolios

Major Trend

Estimating the Downside

At Random

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