Green Book December 2020
A “Fed” Conundrum
“Don’t fight the Fed” has been great advice for stock market investors over the last nine months. For 2021, that won’t cut it. It should be: “Don’t believe the Fed.”
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Featured Articles
Everything’s Great, And Everyone Knows It
The “Biden Bump” brushed away any lingering technical deficiencies in the stock market, but that happy state of affairs is reflected in extremely frothy-looking short-term sentiment indictors. We are riding the momentum to some extent, but with a lower base-level of exposure.
Wall Of Worry?!?
Many pundits argue that sky-high valuations on stay-at-home stocks “prove” equity investors somehow remain fearful. It’s a nuanced, short-term argument, and there’s merit to it: We’d argue such fears have produced terrific relative values among “SMID” Cap stocks.
Super-Rarified Air
The 2020 post-election stock surge looks and feels a lot like the 2016 “Trump Bump.” But, of course there’s a spoiler. The Biden Bump started with a Normalized P/E level about 30% higher than the one prevailing on election eve of 2016 (26.8x versus 20.5x, respectively).
Revisiting The “Reopening Economy” Theme
We review relative price-action patterns among industry groups belonging to the “reopening economy” theme. These are areas that have been hit hard by the pandemic and should benefit the most from a return to economic normalcy. Conversely, a variety of industries profit on days when it appears that the economic shutdown may be prolonged. Recent performance is incorporated to re-examine the trends.
Popular Trades — No “No-Brainers”
We studied several “popular trades” and there are good reasons to be on board with most of them, but none can be viewed as a no-brainer.
Research Preview: Rotating Away From Growth
This study examines Value, Small Cap, and Emerging Markets to see if they do, in fact, behave in a correlated manner when viewed as alternatives to Large Growth. The goal is to determine whether this trio of rotational favorites can be considered as broadly-equivalent replacements for LG.
November’s Giant “Low Quality Stock” Rally
While quant managers watched their factors failing one by one, and market bears stared at the tape in disbelief, the number of retail investors continued to multiply and we witnessed a dramatic performance advantage for low quality stocks. Are we entering a prolonged “junk-rally” cycle?
Factor Chaos
The November 9th Pfizer vaccine news compressed an entire Momentum reversal into one historic day. Factor performance easily broke records looking back over our entire history of data. While great news for the general public, it was awful news for Momentum indicators.
Table of Contents
Stock Market
- November’s Giant “Low Quality Stock” Rally
- A “Fed” Conundrum
- Everything’s Great, And Everyone Knows It
- Wall Of Worry?!?
- High Tide?
- Super-Rarified Air
- Just A “Small” Beginning...
- A 40-Year Inflationary Echo
- A Great Profit Quarter Was “In The Bag”
Of Special Interest
Macro Monitor
Equity Strategies
Quant
Market Internals
Portfolios
Major Trend
Estimating the Downside
At Random
Everything’s Great, And Everyone Knows It
The “Biden Bump” brushed away any lingering technical deficiencies in the stock market, but that happy state of affairs is reflected in extremely frothy-looking short-term sentiment indictors. We are riding the momentum to some extent, but with a lower base-level of exposure.
Wall Of Worry?!?
Many pundits argue that sky-high valuations on stay-at-home stocks “prove” equity investors somehow remain fearful. It’s a nuanced, short-term argument, and there’s merit to it: We’d argue such fears have produced terrific relative values among “SMID” Cap stocks.
Super-Rarified Air
The 2020 post-election stock surge looks and feels a lot like the 2016 “Trump Bump.” But, of course there’s a spoiler. The Biden Bump started with a Normalized P/E level about 30% higher than the one prevailing on election eve of 2016 (26.8x versus 20.5x, respectively).
Revisiting The “Reopening Economy” Theme
We review relative price-action patterns among industry groups belonging to the “reopening economy” theme. These are areas that have been hit hard by the pandemic and should benefit the most from a return to economic normalcy. Conversely, a variety of industries profit on days when it appears that the economic shutdown may be prolonged. Recent performance is incorporated to re-examine the trends.
Popular Trades — No “No-Brainers”
We studied several “popular trades” and there are good reasons to be on board with most of them, but none can be viewed as a no-brainer.
Research Preview: Rotating Away From Growth
This study examines Value, Small Cap, and Emerging Markets to see if they do, in fact, behave in a correlated manner when viewed as alternatives to Large Growth. The goal is to determine whether this trio of rotational favorites can be considered as broadly-equivalent replacements for LG.
November’s Giant “Low Quality Stock” Rally
While quant managers watched their factors failing one by one, and market bears stared at the tape in disbelief, the number of retail investors continued to multiply and we witnessed a dramatic performance advantage for low quality stocks. Are we entering a prolonged “junk-rally” cycle?
Factor Chaos
The November 9th Pfizer vaccine news compressed an entire Momentum reversal into one historic day. Factor performance easily broke records looking back over our entire history of data. While great news for the general public, it was awful news for Momentum indicators.
Stock Market
- November’s Giant “Low Quality Stock” Rally
- A “Fed” Conundrum
- Everything’s Great, And Everyone Knows It
- Wall Of Worry?!?
- High Tide?
- Super-Rarified Air
- Just A “Small” Beginning...
- A 40-Year Inflationary Echo
- A Great Profit Quarter Was “In The Bag”