Green Book July 2020
Different Paths, Same Ending?
For those who believe the economy “drives” trends in stock market leadership, consider the cases of 1999-2000 and 2019-2020. One period featured real growth of 4%, peak EPS growth above 20%, and bond yields at 6%. The other could see a real GDP decline of 5-10% accompanied by an historic EPS collapse, and bond yields below 1%. One featured monetary restraint and a temporary federal surplus, while the other showcased historic extremes in all policy levers that likely represent only the leading edge of what’s to come.
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Featured Articles
Low Single Digits?
We encourage diversity of thought in our shop, but even pessimists among our ranks have a hard time making the case for a ten-year negative return for U.S. stocks, which was recently predicted by the founder of a large hedge fund.
Stimulus Gone Wild!
Market perma-bulls deserve high marks for their persistence, yet, despite all that’s transpired in 2020, their case is exactly the same as six months ago: Extreme stimulus won’t “allow” a significant stock market drop, nor any further economic deterioration.
Retail’s Winners And Losers Of The Pandemic
Following the market bottom, the rebound across retail industries has been robust, but a divide has emerged. Consumers’ needs and behaviors have dramatically shifted as former lifestyles were uprooted. This swift change in economics has resulted in clearly-defined sets of winners and losers among retail industries.
Preview: The Importance Of Quality In Small Caps
One of the signature traits of the U.S. small cap market is the prevalence of money-losing companies. Our recent tally indicates that even prior to COVID-19, 38% of small caps were reporting trailing year losses despite the widespread economic strength of 2019.
No Yield Curve Control? The Fed Spoke Too Soon
There has been chatter about the Fed implementing the so-called Yield Curve Control (YCC). Although the latest FOMC minutes suggest that YCC is not on the agenda for now, we believe the chance of YCC is probably much higher than the market currently anticipates.
Growth Remains Undefeated
What can slowdown the outperformance of Growth stocks? It turns out, the answer to that persistently-unanswerable question is “Not much.” Not even a global pandemic-driven sell-off and swift rebound. From the market high in February through June 30th, Growth handily outperformed every other factor.
The “Next Big Thing” May Not Be Big
There’s one trend that’s lasted almost as long as the bull market and economic expansion and it hasn’t definitively come to an end. The current Large Cap Leadership Cycle hit the nine-year mark in April.
Net Inflow AND Outflow Records Set This Year
As of May 2020, domestic equity mutual funds and bond mutual funds have seen record outflow, while money market mutual funds have received record net inflow. Domestic equity and bond ETFs are also experiencing record net inflow YTD.
Table of Contents
Stock Market
- The Second Wave: No One Seems To Care!
- Different Paths, Same Ending?
- Everyone Loves A Winner
- Low Single Digits?
- Should You Trust The Thrust?
- The “Next Big Thing” May Not Be Big
- How Much For Your “Free Lunch?”
- Commodity Comeback?
- The High/Low Says “Buy High!”
- Stimulus Gone Wild!
Of Special Interest
Macro Monitor
Equity Strategies
- Retail’s Winners And Losers Of The Pandemic
- Sector Rankings With Attractive/High Neutral And Unattractive Industry Groups
Quant
Market Internals
Portfolios
Major Trend
Fund Flow Trends
Estimating the Downside
At Random
Low Single Digits?
We encourage diversity of thought in our shop, but even pessimists among our ranks have a hard time making the case for a ten-year negative return for U.S. stocks, which was recently predicted by the founder of a large hedge fund.
Stimulus Gone Wild!
Market perma-bulls deserve high marks for their persistence, yet, despite all that’s transpired in 2020, their case is exactly the same as six months ago: Extreme stimulus won’t “allow” a significant stock market drop, nor any further economic deterioration.
Retail’s Winners And Losers Of The Pandemic
Following the market bottom, the rebound across retail industries has been robust, but a divide has emerged. Consumers’ needs and behaviors have dramatically shifted as former lifestyles were uprooted. This swift change in economics has resulted in clearly-defined sets of winners and losers among retail industries.
Preview: The Importance Of Quality In Small Caps
One of the signature traits of the U.S. small cap market is the prevalence of money-losing companies. Our recent tally indicates that even prior to COVID-19, 38% of small caps were reporting trailing year losses despite the widespread economic strength of 2019.
No Yield Curve Control? The Fed Spoke Too Soon
There has been chatter about the Fed implementing the so-called Yield Curve Control (YCC). Although the latest FOMC minutes suggest that YCC is not on the agenda for now, we believe the chance of YCC is probably much higher than the market currently anticipates.
Growth Remains Undefeated
What can slowdown the outperformance of Growth stocks? It turns out, the answer to that persistently-unanswerable question is “Not much.” Not even a global pandemic-driven sell-off and swift rebound. From the market high in February through June 30th, Growth handily outperformed every other factor.
The “Next Big Thing” May Not Be Big
There’s one trend that’s lasted almost as long as the bull market and economic expansion and it hasn’t definitively come to an end. The current Large Cap Leadership Cycle hit the nine-year mark in April.
Net Inflow AND Outflow Records Set This Year
As of May 2020, domestic equity mutual funds and bond mutual funds have seen record outflow, while money market mutual funds have received record net inflow. Domestic equity and bond ETFs are also experiencing record net inflow YTD.
Stock Market
- The Second Wave: No One Seems To Care!
- Different Paths, Same Ending?
- Everyone Loves A Winner
- Low Single Digits?
- Should You Trust The Thrust?
- The “Next Big Thing” May Not Be Big
- How Much For Your “Free Lunch?”
- Commodity Comeback?
- The High/Low Says “Buy High!”
- Stimulus Gone Wild!
Of Special Interest
Macro Monitor
Equity Strategies
- Retail’s Winners And Losers Of The Pandemic
- Sector Rankings With Attractive/High Neutral And Unattractive Industry Groups