Green Book August 2016
Long On Equities, Light On Conviction
It was inevitable that when the “Everyone Gets A Trophy” generation graduated to become asset managers and financial journalists, that even your average, run-of-the-mill overvalued market would be awarded the top-dog billing of “bubble.”
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Featured Articles
MTI Returned To A Moderately Bullish Stance
Tactical equity exposure raised to 60-61%, however, our enthusiasm is tempered by high domestic valuations and other evidence that the expansion and associated 7 1/2-year bull market are very mature.
Bubble Or Not?
To revisit the all-time valuation peak of March 2000, the S&P 500 would have to reach 3455 (not a forecast!). A reversion to 1957-to-date median valuations implies an S&P 500 loss of 22%. That’s a serious loss, but hardly on the order of a “busted bubble.”
REITs: “We Are #11” - A Fresh Look At The Newest GICS Sector
On August 31st, Real Estate will become the newest GICS sector and the first Level 1 addition since the framework was unveiled in 1999—REITs had been classified as an industry under the Financials sector.
More Upside For Small Caps?
There was a major cyclical BUY signal (VLT Momentum) for the S&P 500 in late-May, and as of July’s close, that bullish development was reinforced by a new VLT BUY signal on the Russell 2000.
Policies Trump Politics
We find ourselves in the twilight period where the impact of a rate hike might be waning, while the potential election-year impact might be gaining more influence.
Divergence Among Quality Factors
Performance and valuation of the three Quality factors are diverging. From a valuation standpoint, we might see a reversal in performance, with the Stability factor weakening and the Leverage factor strengthening.
July Factor Performance
Value was the only factor category that worked during July. Being the one factor that currently offers rising interest rate exposure, Value has performed inversely to every other category for most of 2016.
Table of Contents
Stock Market
- Active vs. Passive: A Three-Club Headwind
- Long On Equities, Light On Conviction
- Bubble Or Not?
- No Sector On Sale...
- Stock Market Breadth: So Good We’re Suspicious
- Not Entirely In Sync
- Too Many New Highs To Make A High?
- More Upside For Small Caps?
- Energy: Waiting For The Green Light
- Commodities: More To Come?
- Divergence Among Quality Factors
- From Turkey To Thailand, EM Political Risks Hard To Dodge
Of Special Interest
Macro Monitor
Equity Strategies
Quant
Market Internals
Portfolios
- Core & Global Asset Allocation Portfolios
- Domestic & Global Long-Only Portfolios
- 100% Short Portfolio: AdvantHedge
Major Trend
Estimating the Downside
At Random
MTI Returned To A Moderately Bullish Stance
Tactical equity exposure raised to 60-61%, however, our enthusiasm is tempered by high domestic valuations and other evidence that the expansion and associated 7 1/2-year bull market are very mature.
Bubble Or Not?
To revisit the all-time valuation peak of March 2000, the S&P 500 would have to reach 3455 (not a forecast!). A reversion to 1957-to-date median valuations implies an S&P 500 loss of 22%. That’s a serious loss, but hardly on the order of a “busted bubble.”
REITs: “We Are #11” - A Fresh Look At The Newest GICS Sector
On August 31st, Real Estate will become the newest GICS sector and the first Level 1 addition since the framework was unveiled in 1999—REITs had been classified as an industry under the Financials sector.
More Upside For Small Caps?
There was a major cyclical BUY signal (VLT Momentum) for the S&P 500 in late-May, and as of July’s close, that bullish development was reinforced by a new VLT BUY signal on the Russell 2000.
Policies Trump Politics
We find ourselves in the twilight period where the impact of a rate hike might be waning, while the potential election-year impact might be gaining more influence.
Divergence Among Quality Factors
Performance and valuation of the three Quality factors are diverging. From a valuation standpoint, we might see a reversal in performance, with the Stability factor weakening and the Leverage factor strengthening.
July Factor Performance
Value was the only factor category that worked during July. Being the one factor that currently offers rising interest rate exposure, Value has performed inversely to every other category for most of 2016.
Stock Market
- Active vs. Passive: A Three-Club Headwind
- Long On Equities, Light On Conviction
- Bubble Or Not?
- No Sector On Sale...
- Stock Market Breadth: So Good We’re Suspicious
- Not Entirely In Sync
- Too Many New Highs To Make A High?
- More Upside For Small Caps?
- Energy: Waiting For The Green Light
- Commodities: More To Come?
- Divergence Among Quality Factors
- From Turkey To Thailand, EM Political Risks Hard To Dodge
Of Special Interest
Macro Monitor
Equity Strategies
Quant
Market Internals
Portfolios
- Core & Global Asset Allocation Portfolios
- Domestic & Global Long-Only Portfolios
- 100% Short Portfolio: AdvantHedge