Green Book October 2020
The New FOMO
“Bull markets climb a wall of worry,” the old saying goes. We’ve heard that piece of wisdom (or imagined we heard it) every week since early summer. But we doubt it was meant to apply to today, when the paralyzing fear is not of potential loss, but of foregone upside (i.e., fear of missing out, or FOMO).
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Featured Articles
Inflation In The Wrong Places?
Long before policymakers’ extreme response to the COVID collapse, we feared that the Fed’s interventions were suppressing important signals from the stock and bond markets. But we now suspect that hyper-expansionary policies are suppressing price signals from the “real” economy as well.
The Valuation Case For “SMIDs”
Mid and Small Cap stocks underperformed in 2018 and 2019. However, after the collapse of February and March, these “SMID” Caps have largely kept pace with the torrid rebound in the blue chips. Today’s valuations are priming the SMIDs for a similar “decoupling” in the years ahead, like that following Y2K.
Examining The “Reopening Economy” Theme At The Group Level
We examine a variety of industry groups with noteworthy relative price action on both “reopening” and “closed economy” days. Our objective is to shed more light on the industry groups that are consistently moving together on these days.
Markets & Election—Any Clear Result Will Do
We believe the worst outcome would be a drawn-out, contested presidential election that ends up in the Supreme Court. We review historical market patterns under several election-result scenarios.
Research Preview: 2021 Earnings Breakdown
Earnings estimates for 2021 are being projected above the records posted in 2018 and 2019. We ask the question, “How do we get there?” Here we present an introduction to this topic that we will examine at length and provide a full analysis in mid-October.
SPACs: Fashion Or Fad?
Special Purpose Acquisition Companies (SPACs) have become increasingly popular of late. We ask a seemingly simple question: “How do companies fare following a SPAC merger?”
The Use And Abuse Of Corporate Debt
U.S. corporations piled on almost $1 trillion in debt over the first six months of the year (a 10% increase). Corporate debt has now surged to 56% of GDP. We’ve argued that the level of corporate debt isn’t the problem, in and of itself. Rather, it’s what this debt has failed to generate that is the real problem.
2020 Record Fund Inflow AND Outflow Levels Persist
Outflow from equity-focused mutual fund categories remains relentless despite the recovering stock market, while bond ETFs continue to blow-out record inflows.
Table of Contents
Stock Market
- SPACs: Fashion Or Fad?
- The New FOMO
- A Fast Start Comes At A Big Price
- Inflation In The Wrong Places?
- The Valuation Case For “SMIDs”
- The Use And Abuse Of Corporate Debt
- Remember The Yield Curve?
- Tech Mania 2.0 Doesn’t Quite Measure Up
- Homebuilders: The Weird And Unexpected
- Five Reasons To Expect Higher Yields
Of Special Interest
Macro Monitor
Equity Strategies
Market Internals
Portfolios
Major Trend
Fund Flow Trends
Estimating the Downside
At Random
Inflation In The Wrong Places?
Long before policymakers’ extreme response to the COVID collapse, we feared that the Fed’s interventions were suppressing important signals from the stock and bond markets. But we now suspect that hyper-expansionary policies are suppressing price signals from the “real” economy as well.
The Valuation Case For “SMIDs”
Mid and Small Cap stocks underperformed in 2018 and 2019. However, after the collapse of February and March, these “SMID” Caps have largely kept pace with the torrid rebound in the blue chips. Today’s valuations are priming the SMIDs for a similar “decoupling” in the years ahead, like that following Y2K.
Examining The “Reopening Economy” Theme At The Group Level
We examine a variety of industry groups with noteworthy relative price action on both “reopening” and “closed economy” days. Our objective is to shed more light on the industry groups that are consistently moving together on these days.
Markets & Election—Any Clear Result Will Do
We believe the worst outcome would be a drawn-out, contested presidential election that ends up in the Supreme Court. We review historical market patterns under several election-result scenarios.
Research Preview: 2021 Earnings Breakdown
Earnings estimates for 2021 are being projected above the records posted in 2018 and 2019. We ask the question, “How do we get there?” Here we present an introduction to this topic that we will examine at length and provide a full analysis in mid-October.
SPACs: Fashion Or Fad?
Special Purpose Acquisition Companies (SPACs) have become increasingly popular of late. We ask a seemingly simple question: “How do companies fare following a SPAC merger?”
The Use And Abuse Of Corporate Debt
U.S. corporations piled on almost $1 trillion in debt over the first six months of the year (a 10% increase). Corporate debt has now surged to 56% of GDP. We’ve argued that the level of corporate debt isn’t the problem, in and of itself. Rather, it’s what this debt has failed to generate that is the real problem.
2020 Record Fund Inflow AND Outflow Levels Persist
Outflow from equity-focused mutual fund categories remains relentless despite the recovering stock market, while bond ETFs continue to blow-out record inflows.
Stock Market
- SPACs: Fashion Or Fad?
- The New FOMO
- A Fast Start Comes At A Big Price
- Inflation In The Wrong Places?
- The Valuation Case For “SMIDs”
- The Use And Abuse Of Corporate Debt
- Remember The Yield Curve?
- Tech Mania 2.0 Doesn’t Quite Measure Up
- Homebuilders: The Weird And Unexpected
- Five Reasons To Expect Higher Yields