Green Book January 2021
Passive’s “Placid Pandemic Performance”
While the rest of the world couldn’t wait for 2020 to end, investors might be sorry to see it go.
That’s especially true for the passive equity crowd: They probably just witnessed the most powerful, single-year reinforcement of the “buy and hold” mantra of all time.
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Featured Articles
Heating Up Quickly
Inflation surprises have run hotter in the U.S. than in the rest of the world, no doubt reflecting the strength of major currencies versus the U.S. dollar.
The Case For “Five Percent”
Forecasting GDP is hardly our forte, but 2021 should see a very big gain in real output. Our current guess is for real GDP to grow 5% this year. Statistically, though, that doesn’t imply that the stock market’s move will also be large (or even of the same “sign”).
Passive’s “Placid Pandemic Performance”
The 200-day “report card” for this bull market shows the best initial-performance gain of all postwar bulls, but it’s come at a price. Investor sentiment is above levels seen at the same point of past bull markets… and there are the valuations.
2021 Time Cycle — A Year Of Two Halves
We’ve updated our time-cycle composite for 2021 and it looks like it will be a year of “two halves,” with a low-vol bull-market extension in the first half of the year, followed by a much more volatile second half. This also appears to extend outside the U.S.
Research Preview: Factor Standings For 2020
As we review factor and style returns for 2020, it occurs to us that the “whole” is much less interesting than the sum of its parts. Many factors are considered to be either bullish or bearish in temperament, and last year’s round-trip offers an opportunity to test the reliability of those characterizations.
GS Scores Perform Well Amid 2020 Volatility
The GS Scores handled the chaotic, 2020 market well, turning in a +10.1% return spread. The lone black-eye was November, when the Pfizer vaccine news upended quant factors and produced the worst single-day performance in GS Score history.
Industry “Dreams” And “Nightmares”
We take a look at our historical analysis of industry-group portfolios to see how the “Dreams” and “Nightmares” from 2019 fared in 2020. The industry-group composition of the 2020 Dream and Nightmare portfolios is also presented.
The Relationship Between ETF Fund Flow & Future Returns
In April 2018, armed with a large number of ETFs and long-enough historical data, we applied our back-testing methodology for individual stocks to the universe of ETFs to determine if the same (or some) of those components could useful for assessing ETF performance prospects. One of the factors we reviewed was fund flow (adjusted by AUM), which revealed that those ETFs experiencing the largest asset inflows proceeded to significantly underperform.
New Records In 2020
Despite fresh all-time highs in the stock market, heavy net outflow from equity focused mutual funds shows no sign of abating. With 2020 data through November, fund flows for MFs that focus on domestic or foreign equities saw an incredible $569 billion head for the exits.
Table of Contents
Stock Market
- The Relationship Between ETF Fund Flow & Future Returns
- Passive’s “Placid Pandemic Performance”
- What If It’s Just A “Median” Bull?
- Y2K 2.0?
- Heating Up Quickly
- Liquidity Didn’t Lift Quite Everything In 2020
- Rewarding “Perfect Foresight”
- Momentum Across Asset Classes
- Triggered!?
- The Case For “Five Percent”
- Bridesmaid Track Record
- Bridesmaid Strategy Risk And Reward
- Bridesmaid Strategy For Equity Managers
- Sector Bridesmaid Track Record
- For Value Investors Only!
- Low P/E Track Record
Of Special Interest
Macro Monitor
Equity Strategies
Quant
Market Internals
Portfolios
Major Trend
Fund Flow Trends
Estimating the Downside
At Random
Heating Up Quickly
Inflation surprises have run hotter in the U.S. than in the rest of the world, no doubt reflecting the strength of major currencies versus the U.S. dollar.
The Case For “Five Percent”
Forecasting GDP is hardly our forte, but 2021 should see a very big gain in real output. Our current guess is for real GDP to grow 5% this year. Statistically, though, that doesn’t imply that the stock market’s move will also be large (or even of the same “sign”).
Passive’s “Placid Pandemic Performance”
The 200-day “report card” for this bull market shows the best initial-performance gain of all postwar bulls, but it’s come at a price. Investor sentiment is above levels seen at the same point of past bull markets… and there are the valuations.
2021 Time Cycle — A Year Of Two Halves
We’ve updated our time-cycle composite for 2021 and it looks like it will be a year of “two halves,” with a low-vol bull-market extension in the first half of the year, followed by a much more volatile second half. This also appears to extend outside the U.S.
Research Preview: Factor Standings For 2020
As we review factor and style returns for 2020, it occurs to us that the “whole” is much less interesting than the sum of its parts. Many factors are considered to be either bullish or bearish in temperament, and last year’s round-trip offers an opportunity to test the reliability of those characterizations.
GS Scores Perform Well Amid 2020 Volatility
The GS Scores handled the chaotic, 2020 market well, turning in a +10.1% return spread. The lone black-eye was November, when the Pfizer vaccine news upended quant factors and produced the worst single-day performance in GS Score history.
Industry “Dreams” And “Nightmares”
We take a look at our historical analysis of industry-group portfolios to see how the “Dreams” and “Nightmares” from 2019 fared in 2020. The industry-group composition of the 2020 Dream and Nightmare portfolios is also presented.
The Relationship Between ETF Fund Flow & Future Returns
In April 2018, armed with a large number of ETFs and long-enough historical data, we applied our back-testing methodology for individual stocks to the universe of ETFs to determine if the same (or some) of those components could useful for assessing ETF performance prospects. One of the factors we reviewed was fund flow (adjusted by AUM), which revealed that those ETFs experiencing the largest asset inflows proceeded to significantly underperform.
New Records In 2020
Despite fresh all-time highs in the stock market, heavy net outflow from equity focused mutual funds shows no sign of abating. With 2020 data through November, fund flows for MFs that focus on domestic or foreign equities saw an incredible $569 billion head for the exits.
Stock Market
- The Relationship Between ETF Fund Flow & Future Returns
- Passive’s “Placid Pandemic Performance”
- What If It’s Just A “Median” Bull?
- Y2K 2.0?
- Heating Up Quickly
- Liquidity Didn’t Lift Quite Everything In 2020
- Rewarding “Perfect Foresight”
- Momentum Across Asset Classes
- Triggered!?
- The Case For “Five Percent”
- Bridesmaid Track Record
- Bridesmaid Strategy Risk And Reward
- Bridesmaid Strategy For Equity Managers
- Sector Bridesmaid Track Record
- For Value Investors Only!
- Low P/E Track Record